Airbus story

7/29/2019 Airbus story

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Air bus

Thousands of jobs could be shed by British Aerospace and its three partners in Airbus Industrie underplans for a radical overhaul of the European aircraft manufacturer.Proposals for restructuring the consortium with the eventual aim of turning it into a conventional publiccompany will be presented to the Airbus board in late June.

The four partners employ about 30,000 in Britain, France, Germany and Spain. Jean Pierson, Airbusmanaging director, said yesterday that the restructuring could enable it to make large cost savings of up to20 per cent, making Airbus more competitive with its American rival Boeing.

This could entail up to 6,000 job losses across the board, including more than 1,000 in Britain, but Airbusexecutives would not be drawn on the numbers.

Mr Pierson said the biggest scope for cost-savings was in the ranks of white collar staff where there wasvast duplication of activities such as purchasing.

British Aerospace employs around 7,000 directly on Airbus work at two main sites in Bristol and Chester,but the total number ofjobs inBritain dependent on Airbus work is put at 25,000. A 20 per cent costreduction could result in up to 1,500 job losses in the UK.

A further 8,000 workers are employed by Aerospatiale in France. The two other partners are DeutscheAerospace and Casa of Spain. Airbus employs 2,000 people in Toulouse.

The report on the restructuring of the consortium, drawn up by Airbus chairman Edzard Reuter will setout several options. These will range from retaining Airbus as a group of economic interests (GEI) to amuch more fundamental overhaul whereby the four partners become equity shareholders in aconventionally structured company.

Another option is to create an intermediate structure short of full plc status. Mr Pierson ruled out a

flotation of Airbus in the foreseeable future.

Under the present structure the workload of Airbus is parcelled out according to the shareholdings of eachpartner. BAe, which has a 20 per cent stake, makes aircraft wings. But this has been criticised as anunwieldy and inefficient system that increases costs massively.

Converting Airbus into a plc would allow it to awardworkon the basis of competitive tendering.

Crucial issues still to be resolved include what assets each partner would put in, how they would be valuedand what overall authority Airbus would have.

Germany has already warned that it will not help fund the next Airbus project, the $8bn (pounds 5.3bn)

development of a 500-plus seater super-jumbo, unless the consortium is restructured. BAe has beenpressing for Airbus to become a plc for nearly a decade.

With Aerospatiale now apparently also committed to overhauling Airbus Mr Pierson said support forchange was becoming overwhelming.

"We are in the last hundred yards of the race and we are approaching crucial decisions," he said. "Theenthusiasm is there now whereas 10 years ago there wasn't the spirit. Now all that has changed. Thecompetition is tougher not just on price but on product and service and we have reached the point where
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everyone realises it is time to do something." Cost-cutting would be concentrated on the Airbus"bureaucracy".

Airbus A380 vs Boeing 747

Cross-section comparison of the Airbus A380 and the Boeing 747-400

Thewide-bodyBoeing 747-8, the latest modification of Boeing's largest airliner, is notably in direct

competition on long-haul routes with the A380, a full-lengthdouble-deck aircraftnow in service. For

airlines seeking very large passenger airliners, the two have been pitched as competitors on variousoccasions. Following anotherdelay to the A380 programmein October 2006,FedExand theUnited

Parcel Servicecanceled their orders for theA380-800 freighter. Some A380 launch customers deferred

delivery or considered switching to the 747-8 and 777F aircraft.[2][3]

Boeing's advertising claims the 747-8I to be over 10% lighter per seat and have 11% less fuel

consumption per passenger, with a trip-cost reduction of 21% and a seat-mile cost reduction of more than

6%, compared to the A380. The 747-8F's empty weight is expected to be 80 tonnes (88 tons) lighter and

24% lower fuel burnt per ton with 21% lower trip costs and 23% lower ton-mile costs than the

A380F.[4]On the other side, Airbus' advertising claims the A380 to have 8% less fuel consumption per

passenger than the 747-8I and emphasizes the longer range of the A380 while using up to 17% shorter

runways.[5]

In order to counter the perceived strength of the 747-8I, from 2012 Airbus will offer, as anoption, improved maximum take-off weight allowing for a better payload/range performance. The precise

size of the increase in maximum take-off weight is still unknown. British Airways and Emirates will be the

first customers to take this offer.[6]As of April 2009 no airline has canceled an order for the passenger

version of the A380. Boeing currently has only three commercial airline orders for the 747-

8I:Lufthansa(20),Korean Airlines(5) andArik Air(2).[7]

[edit]EADS A330 MRTT - Northrop Grumman KC-45A vs Boeing KC-767

The announcement in March 2008 that Boeing had lost a US$40 billion refuelling aircraft contract to

Northrop Grumman and Airbus for theEADS/Northrop Grumman KC-45with theUnited States Air

Forcedrew angry protests in theUnited States Congress.[8]Upon review of Boeing's protest,

theGovernment Accountability Officeruled in favor of Boeing and ordered the USAF to recompete thecontract. Later, the entire call for aircraft was rescheduled, then canceled, with a new call decided upon in

March 2010.

Boeing later won the contest, with a lower price, on February 24, 2011.[9]The price was so low some in

the media believe Boeing would take a loss on the deal; they also speculated that the company could

perhaps break even with maintenance and spare parts contracts.[10]In July 2011, it was revealed that

projected development costs rose $1.4bn and will exceed the $4.9bn contract cap by $300m. For the first
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$1bn increase (from the award price to the cap), the U.S. government would be responsible for $600m

under a 60/40 government/Boeing split. With Boeing being wholly responsible for the additional $300m

ceiling breach, Boeing would be responsible for a total of $700m of the additional cost.[11][12][13][clarification

needed]

[edit]Competition and comparison

[edit]Competition by outsourcing

Because many of the worlds airlines are wholly or partially government owned, aircraft procurement

decisions are often taken according to political criteria in addition to commercial ones. Boeing and Airbus

seek to exploit this by subcontracting production of aircraft components or assemblies to manufacturers in

countries of strategic importance in order to gain a competitive advantage.

For example, Boeing has maintained longstanding relationships with Japanese suppliers

includingMitsubishi Heavy IndustriesandKawasaki Heavy Industriesby which these companies have

had increasing involvement on successive Boeing jet programs, a process which has helped Boeing

achieve almost total dominance of the Japanese market for commercial jets. Outsourcing was extended

on the 787 to the extent that Boeings own involvement was reduced to little more than project

management, design, assembly and test operation, outsourcing most of the actual manufacturing all

around the world. Boeing has since stated that it "outsourced too much" and that future airplane projects

will depend far more on Boeing's own engineering and production personnel .[14]

Partly because of its origins as a consortium of European companies, Airbus has had fewer opportunities

to outsource significant parts of its production beyond its own European plants. However, in 2009 Airbus

has opened an assembly plant inTianjin,Chinafor production of its A320 series airliners.[15]

[edit]Competition through use of technology

Airbus sought to compete with the well-established Boeing in the 1970s through its introduction of

advanced technology. For example, theA300made the most extensive use ofcomposite materialsyetseen in an aircraft of that era, and by automating theflight engineer'sfunctions, was the first large

commercial jet to have a two-man flight crew. In the 1980s Airbus was the first to introduce digitalFly-by-

wirecontrols into an airliner (theA320).

Since then Airbus has established itself as a viable competitor to Boeing, both companies use advanced

technology to seek performance advantages in their products. For example, the Boeing 787 Dreamliner is

the first large airliner to use composites for most of its construction. According to Airbus'John Leahy,

theDreamliner's battery troubleswill not cause customers to switch airplane supplier.[16]

[edit]Competition through provision of engine choices

The competitive strength in the market of any airliner is considerably influenced by the choice(s) of engineavailable. In general, airlines prefer to have a choice of at least two engines from the major

manufacturersGeneral Electric,Rolls-RoyceandPratt & Whitney. However engine manufacturers prefer

to be single source, and often succeed in striking commercial deals with Boeing and Airbus to achieve

their objective. Several notable aircraft have only provided a single engine offering: theBoeing 737-

300series onwards (CFM56), theAirbus A340-500 & 600(Rolls-Royce Trent 500), theAirbus

A350(Rolls-Royce Trent XWB- so far) theBoeing 747-8(GEnx-2B67), and the Boeing777-

300ER/200LR/F (General Electric GE90).[17]
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[edit]Effect of currency on competition

Boeing's production costs are mostly inUnited States dollars, wheareas Airbus' production costs are

mostly ineuros. When the dollar appreciates against the euro the cost of producing a Boeing aircraft rises

relatively to the cost of producing an Airbus aircraft, and conversely when the dollar falls relative to the

euro it is an advantage for Boeing. There are also possible currency risks and benefits involved in the

way aircraft are sold. Boeing typically prices its aircraft only in dollars, while Airbus, although pricing most

aircraft sales in dollars, has been known to be more flexible and has priced some aircraft sales in Asia

and the Middle East in multiple currencies. Depending on currency fluctuations between the acceptance

of the order and the delivery of the aircraft this can result in an extra profit or extra expense - assuming

Airbus has not purchased insurance against such fluctuations.[18]

[edit]Effect of competition on product plans

TheA320has been selected by 222 operators (Dec. 2008), among these several low-cost operators,

gaining ground against the previously well established737in this sector; many full-service airlines also

have selected it as a replacement for727sand aging737s, such asStar AlliancemembersUnited

AirlinesandLufthansa; and after 40 years the A380 now challenges the Boeing 747s dominance of the

very large aircraft market. TheBoeing 747-8is a stretched and updated version of the venerable 747-400

and will offer greater capacity, fuel efficiency and longer range. Frequent delays to the Airbus A380

program caused several customers to consider cancelling their orders in favour of the refreshed 747-

8,[19]although none have done so and some have even placed repeat orders for the A380. However, all

A380F orders have been cancelled. To date, Boeing has secured orders for 78 747-8F and 28 747-8I with

first deliveries originally scheduled for 2010 and 2011 respectively now, after certification the 747-8F,

revised to 2011 and 2012 as the 747-8I is still (as of August 2011) being test-flown, while Airbus has

orders for 262 A380s, the first of which entered service in 2007 and has delivered a total of 92 to

customers (as of December 2012).

Several Boeing projects were pursued and then canceled, like the Sonic Cruiser, launched in 2001.

Boeing is now focused on the Boeing 787 Dreamliner as a platform of total fleet rejuvenation, which uses

technology from the Sonic Cruiser concept. The 787's rapid sales success and pressure from potential

customers forced Airbus to revise the design of its competing A350.

Boeing first ruled out producing a re-engined version of its 737 to compete with the A320neo launch in

2016 saying it did not believe airlines would be willing to pay 10% more for only a few percentage gained

in fuel efficiency, instead airlines would be looking towards the next major redesign and a 30% fuel

saving. The company is facing airline pressure to offer a direct re-engined competitor including from

Southwest Airlines who use the 737 for their entire fleet (680 in service or on order) saying they were not

prepared to wait 20 years or more for a new 737 model and threatening to convert to Airbus. Industry

sources believe that a re-engine of the 737 would be considerably more expensive for Boeing than it was

for Airbus A320 due to the 737's design. Boeing eventually bowed to pressure in the summer of 2011agreeing to supply a large quantity of a new version called the 737 MAX for one customer and the

following quarter made the new product available to other customers.[20]

[edit]Safety

Both aircraft manufacturers have good safety records on recently manufactured aircraft. By convention,

both companies tend to avoid safety comparisons when selling their aircraft to airlines. Most aircraft

dominating the companies' aircraft sales, such as theBoeing 737-NGandAirbus A320families (as well
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as both companies'wide-bodyofferings) have good safety records as well. Older model aircraft such as

theBoeing 727, the originalBoeing 737sand 747s, Airbus A300 andAirbus A310, which were

respectively first flown during the 1960s, 1970s, and 1980s, have had higher rates of fatal accidents . [21]

European planemaker Airbus and US rival Boeing have traded stinging barbs over controversial government support

for aircraft development, accusing each other of bending the rules.

Airbus was first out of the blocks, rejecting claims by its arch-rival that it had caused job losses in the United States,arguing that Boeing itself was responsible for destroyingemployment.

"Boeing repeats its old standby that European reimbursable loans destroyed jobs in America," Airbus said in a

statement issued after it unveiled plans Monday to open a factory on Boeing's home turf.

"The WTO (World Trade Organization) dismissed such claims and has specifically found that Boeing's own

management decisions and its outsourcing/offshoring policy were exclusively responsible for American job losses," it

said.

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Boeing responded in kind, charging Airbus with getting six times the government subsidies it had received.

WTO findings "were crystal clear," it said. "$3.0 billion of subsidies not already corrected against Boeing versus $18

billion of subsidies against Airbus."

It said it would "support whatever steps the US government deems necessary to fulfill its WTO obligations. We expectthe same commitment to compliance from Airbus and the European Union.

"Yet they have singularly failed to meet the WTO requirement to remove outstanding illegal subsidies or their adverse

effects," it said.

Worse still, Boeing charged that Airbus was continuing to get similar subsidies for its new wide-bodied A350 plane,

aimed to compete directly with its own 787 Dreamline.

"Airbus and the EU must take immediate steps to comply with the WTO's ruling to deal with outstanding subsidies

and it must finance the A350 and all other future programs on commercial terms," it said.

Boeing and Airbus, which dominate the global aircraft business, have been at odds for years over subsidies they

receive from their government backers, and both have won and lost complaints filed against the other at the WTO.

The European firm said in Monday's statement that "as Boeing persists in misleading the public, Airbus expects

another WTO ruling that confirms once again its prior findings."

These were, it said, that European government loans were a WTO-compliant private-public partnership mechanismwhile grants, as received by Boeing, were illegal.

Airbus, a subsidiary of the European Aeronautic Defence and Space Company (EADS), called on Boeing to "walk the

talk: cut the cheap misinformation and the massive illegal government subsidies".

Airbus on Monday said it planned to build a $US600 million assembly plant in the US port city of Mobile, Alabama, on

the Gulf of Mexico, to produce the popular A320 passenger planes.

The firm, based in Toulouse in southwestern France, said it will roll out its first US-built plane by 2016.

Airbus estimates 4600 new single-aisle aircraft will be needed in the United States over the next 20 years and the

new US plant could more than double its share of the huge market.

Read more:http://www.smh.com.au/business/world-business/airbus-boeing-trade-barbs-20120705-21i7v.html#ixzz2JTL9U3sB
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