Airbus

Airbus S.A.S. is an aircraft manufacturing subsidiary of EADS, a European aerospace concern. Based in Toulouse, France and with significant activity across Europe, the company produces around half of the world's jet airliners.

Airbus began as a consortium of aerospace manufacturers. Consolidation of European defence and aerospace companies around the turn of the century allowed the establishment of a simplified joint stock company in 2001, owned by EADS (80%) and BAE Systems (20%). After a protracted sale process BAE sold its shareholding to EADS on 13 October 2006.

Airbus employs around 57,000 people at sixteen sites in four European countries: Germany, France, the United Kingdom, and Spain. Final assembly production is at Toulouse (France) and Hamburg (Germany). Airbus has subsidiaries in the United States, Japan and China

History

Airbus Industrie began as a consortium of European aviation firms to compete with American companies such as Boeing, McDonnell Douglas, and Lockheed.

While many European aircraft were innovative, even the most successful had small production runs. In 1991, Jean Pierson, then CEO and Managing Director of Airbus Industrie, described a number of factors which explained the dominant position of American aircraft manufacturers: the land mass of the United States made air transport the favoured mode of travel; a 1942 Anglo-American agreement entrusted transport aircraft production to the US; and World War II had left America with "a profitable, vigorous, powerful and structured aeronautical industry."

In the mid-1960s, tentative negotiations commenced regarding a European collaborative approach. At the 1965 Paris Air Show major European airlines informally discussed their requirements for a new short- to medium-range "airbus". European aircraft manufacturers were aware of the risks of such a development and began to accept, along with their governments, that collaboration was required to develop such an aircraft and to compete with the US manufacturers. The same year Hawker Siddeley (at the urging of the UK government) teamed with Breguet and Nord to study airbus designs. The Hawker Siddeley/Breguet/Nord groups HBN 100 became the basis for the continuation of the project. By 1966 the partners were Sud Aviation (France), Arbeitsgemeinschaft Airbus, later Deutsche Airbus (Germany) and Hawker Siddeley (UK). A request for funding was made to the three governments in October 1966.

An Airbus 380(above)

By early 1967 the "A300" label began to be applied and the proposal developed into a 320 seat, twin engined airliner. On 25 July 1967 the three governments agreed to proceed to the definition stage with the mission statement:

Shortly after the agreement, Roger Béteille was appointed technical director of the A300 projectBéteille developed a division of labour which would be the basis of Airbus' production for years to come: France would manufacture the cockpit, flight control and the lower centre section of the fuselage; Hawker Siddeley, whose Trident technology had impressed him, was to manufacture the wings; Germany should make the forward and rear fuselage sections, as well as the upper centre section; The Dutch would make the flaps and spoilers; finally Spain (yet to become a full partner) would make the horizontal tailplane. On 26 September 1967 the German, French and British governments signed a Memorandum of Understanding in London which allowed continued development studies. This also confirmed Sud Aviation as the "lead company", that France and the UK would each have a 37.5% workshare with Germany taking 25%, and that Rolls-Royce would manufacture the engines.

In the two years following this agreement, both the British and French governments expressed doubts about the project. The MoU had stated that 75 orders must be achieved by 31 July 1968. However lukewarm airline support for a 300 seat Airbus A300 lead to the partners submitting the A250 proposal (what became the A300B) for a 250 seat airliner powered by existing engines This dramatically reduced development costs, as the Rolls-Royce RB207 represented a large proportion of those costs. The RB207 had also suffered difficulties, since Rolls-Royce was concentrating its efforts on the development of the related RB211 for the Lockheed L-1011.[6] The French government threatened to withdraw from the project due to the concern over funding development of the Airbus A300, Concorde and the Dassault Mercure concurrently, but was persuaded otherwise.Having announced its concern at the A300B proposal in December 1968, and fearing it would not recoup its investment due to lack of sales, the British government announced its withdrawal on 10 April 1969. Germany took this opportunity to increase its share of the project to 50%. Given the participation by Hawker Siddeley up to that point, France and Germany were reluctant to take over its wing design. Thus the British company was allowed to continue as a privileged subcontractor. Hawker Siddeley invested GBL35 million in tooling and, requiring more capital, received a GBL35 million loan from the German government.

Formation of Airbus Industrie

Airbus A300, the first aircraft model launched by Airbus.(above)

Airbus Industrie was formally established as a Groupement d'Interet Economique (Economic Interest Group or GIE) on 18 December 1970. The name "Airbus" was taken from a non-proprietary term used by the airline industry in the 1960s to refer to a commercial aircraft of a certain size and range, for this term was acceptable to the French linguistically. Aerospatiale and Deutsche Airbus each took a 36.5% share of production work, Hawker Siddeley 20% and Fokker-VFW 7%. Each company would deliver its sections as fully equipped, ready-to-fly items. In October 1971 the Spanish company CASA acquired a 4.2% share of Airbus Industrie, with Aerospatiale and Deutsche Airbus reducing their stakes to 47.9%. In January 1979 British Aerospace, which had absorbed Hawker Siddeley in 1977, acquired a 20% share of Airbus Industrie. The majority shareholders reduced their shares to 37.9%, while CASA retained its 4.2%.

In 1972, the A300 made its maiden flight and the first production model, the A300B2 entered service in 1974. Initially the success of the consortium was poor but by 1979 there were 81 aircraft in service. It was the launch of the A320 in 1981 that guaranteed the status of Airbus as a major player in the aircraft market - the aircraft had over 400 orders before it first flew, compared to 15 for the A300 in 1972.

Transition to Airbus SAS

The retention of production and engineering assets by the partner companies in effect made Airbus Industrie a sales and marketing company. This arrangement led to inefficiencies due to the inherent conflicts of interest that the four partner companies faced; they were both GIE shareholders and subcontractors to the consortium. The companies collaborated on development of the Airbus range, but guarded the financial details of their own production activities and sought to maximise the transfer prices of their sub-assemblies.

In the early 1990s the then Airbus CEO Jean Pierson argued that the GIE should be abandoned and Airbus established as a conventional company. However, the difficulties of integrating and valuing the assets of four companies, as well as legal issues, delayed the initiative. In December 1998, when it was reported that British Aerospace and DASA were close to merging, Aérospatiale paralysed negotiations on the Airbus conversion; the French company feared the combined BAe/DASA, which would own 57.9% of Airbus, would dominate the company and it insisted on a 50/50 split. However, the issue was resolved in January 1999 when BAe abandoned talks with DASA in favour of merging with Marconi Electronic Systems to become BAE Systems. Then in 2000 three of the four partner companies (DaimlerChrysler Aerospace, successor to Deutsche Airbus; Aérospatiale-Matra, successor to Sud-Aviation; and CASA) merged to form EADS, simplifying the process. EADS now owned Airbus France, Airbus Deutschland and Airbus Espana, and thus 80% of Airbus Industrie. BAE Systems and EADS transferred their production assets to the new company, Airbus SAS, in return for shareholdings in that company.

Airbus Factory, Toulouse

BAE sale and A380 controversy

On 6 April 2006 BBC News reported that BAE Systems was again selling its share, then "conservatively valued" at €3.5 billion (US$4.17 bn). The move was seen by many analysts as a move to make partnerships with U.S. firms more feasible, in both financial and political terms. BAE originally sought to agree a price with EADS through an informal process. However, due to the slow pace of negotiations and disagreements over price, BAE exercised its put option which saw investment bank Rothschild appointed to give an independent valuation.

In June 2006, Airbus became embroiled in a significant international controversy over its announcement of a further delay in the delivery of its A380. In the wake of the announcement, the value of associated stock plunged by up to a quarter in a matter of days, although it soon recovered somewhat. Allegations of insider trading on the part of Noël Forgeard, CEO of EADS, its majority corporate parent, promptly followed. The loss of associated value caused great concern on the part of BAE, The Independent describing a "furious row" between BAE and EADS, with BAE believing the announcement was designed to depress the value of its share A French shareholder group filed a class action lawsuit against EADS in a Dutch court for failing to inform investors of the financial implications of the A380 delays while airlines to which deliveries were promised are expected to demand compensation. As a result, EADS chief Noël Forgeard and Airbus CEO Gustav Humbert announced their resignations on 2 July 2006.[16] Forgeard's severance package is expected to include three years of salary plus the 2005 bonus; a total of at least €6 million, possibly topping €7 million.

On 2 July 2006 Rothschild valued BAE's stake at L1.9 billion (€2.75 billion), well below the expectation of BAE analysts and even EADS. On 5 July BAE appointed independent auditors to investigate how the value of its share of Airbus had fallen from the original estimates to the Rothschild valuation. They pushed back any potential sale until September at the earliest. On 6 September 2006 BAE agreed to sell its stake in Airbus to EADS for L1.87 billion (€2.75 billion, $3.53 billion), pending BAE shareholder approval.On 4 October shareholders voted in favour of the sale.

On 9 October 2006 Christian Streiff, Humbert's successor, resigned due to differences with parent company EADS over the amount of independence he would be granted in implementing his reorganization plan for Airbus. He will be succeeded by EADS co-CEO Louis Gallois. This brings Airbus under more direct control of its parent company.

Catia debacle

On 3 October 2006, Christian Streiff announced that the reason for delay of the Airbus A380 was the use of incompatible software used to design the aircraft. Primarily, the Toulouse assembly plant used the latest version 5 of Catia (made by Dassault), while the design centre at the Hamburg factory used an older incompatible version 4. Parts of the plane were also designed using Parametric Technology Corporation software. The responsibility for the problem was put on the top management for not placing a high enough priority on forcing the compatible software through all parts of the organization. The result was that the 530km of cables wiring throughout the aircraft has to be completely redesigned.

The cost of this debacle is expected to reach $6.1 billion over the next four years. Although none of the orders have been canceled, Airbus will have to pay millions in late-delivery penalties.

2007 restructuring

On 28 February 2007, CEO Louis Gallois announced the company's restructuring plans. Entitled Power8, the plan would see 10,000 jobs cut over four years; 4,300 in France, 3,700 in Germany, 1,600 in the UK and 400 in Spain. 5,000 of the 10,000 would be at sub contractors. Plants at Saint Nazaire, Varel and Laupheim face sell off or closure, while Meaulte, Nordenham and Filton are "open to investors". The announcements have resulted in Airbus unions in France planning to strike, with German Airbus workers possibly following.

Civilian products

The Airbus product line started with the A300, the world's first twin-aisle, twin-engined aircraft. A shorter, re-winged, re-engined variant of the A300 is known as the A310. Building on its success, Airbus launched the A320 with its innovative fly-by-wire control system. The A320 has been, and continues to be, a great commercial success. The A318 and A319 are shorter derivatives with some of the latter under construction for the corporate biz-jet market (Airbus Corporate Jet). A stretched version is known as the A321 and is proving competitive with later models of the Boeing 737.

The longer-range products, the twin-jet A330 and the four-engine A340, have efficient wings, enhanced by winglets. The Airbus A340-500 has an operating range of 16 700 kilometres (9000 nautical miles), the second longest range of any commercial jet after the Boeing 777-200LR (range of 17 446 km or 9420 nautical miles). The company is particularly proud of its use of fly-by-wire technologies and the common cockpit systems in use throughout the aircraft family, which make it much easier to train crew.

Airbus is studying a replacement for the A320 series, tentatively dubbed NSR, for "New Short-Range aircraft."

In July 2007, Airbus delivered its last A300 to FedEx, marking the end of the A300/A310 production line. Airbus intends to relocate Toulouse A320 final assembly activity to Hamburg, and A350/A380 production in the opposite direction as part of its Power8 organization plan begun under ex-CEO Christian Streiff.

Airbus supplied replacement parts and service for the Concorde until its retirement in 2003.

Competition with Boeing

Airbus is in tight competition with Boeing every year for aircraft orders. Though both manufacturers have a broad product range in various segments from single-aisle to wide-body, their aircraft do not always compete head-to-head. Instead they respond with models a bit smaller or a bit bigger than the other in order to plug any holes in demand and achieve a better edge. The A380, for example, is designed to be a bit bigger than the 747. The A350 XWB competes with the high end of the 787 and the low end of the 777. The A320 is bigger than the 737-700 but smaller than the 737-800. The A321 is bigger than the 737-900 but smaller than the previous 757-200. Airlines see this as a benefit since they get a more complete product range from 100 seats to 500 seats than if both companies offered identical aircraft.

In recent years the Boeing 777 has outsold its Airbus counterparts, which include the A340 family as well as the A330-300. The smaller A330-200 competes with the 767, outselling its Boeing counterpart in recent years. The A380 is anticipated to further reduce sales of the Boeing 747, gaining Airbus a share of the market in very large aircraft, though frequent delays in the A380 program have caused several customers to consider the refreshed 747-8.[27] Airbus has also proposed the A350 XWB to compete with the fast-selling Boeing 787, after being under great pressure from airlines to produce a competing model.

There are around 4,463 Airbus aircraft in service, with Airbus managing to win over 50 per cent of aircraft orders in recent years. Airbus products are still outnumbered 6 to 1 by in-service Boeings (there are over 5,000 Boeing 737s alone in service). This however is indicative of historical success - Airbus made a late entry into the modern jet airliner market (1972 vs. 1958 for Boeing).

Airbus won a greater share of orders in 2003, 2004. It also delivered more aircraft in 2003, 2004, 2005 & 2006.

In 2005, Airbus made a claim to victory again with 1111 (1055 net), compared to 1029 (net of 1002) for Boeing However, Boeing won 55% of 2005 orders by value, due to that firm winning several important widebody sales at the expense of Airbus.

In 2006 Boeing won more orders by both measures. Airbus regained parity as of mid-2007.

Military products

In January 1999 Airbus established a separate company, Airbus Military S.A.S., to undertake development and production of a turboprop-powered tactical transport aircraft (the Airbus Military A400M.) The A400M is being developed by several NATO members, Belgium, France, Germany, Luxembourg, Spain, Turkey, and the UK, as an alternative to the C-130 Hercules. Expansion in the military aircraft market will reduce, but not negate, Airbus' exposure to the effects of cyclical downturns in civil aviation.