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Airbus tests political climate on production shake-up

Airbus tests political climate on production shake-up

Airbus hinted Thursday that it was considering politically sensitive moves to concentrate assembly of its newest planes in France, as massive delays to its A380 superjumbo program threaten to sink plans for a new mid-sized jet to rival Boeing's 777 Dreamliner.
A transfer of A380 work to France from Germany is among options being discussed, Airbus CEO Christian Streiff indicated, and the smaller A350 XWB could also be built near the company's Toulouse headquarters _ if it's built at all.
Airbus, which stunned investors in June by doubling the A380's production delay to one year, doubled it again to two years this week and said the accumulated holdups would wipe a total euro4.8 billion (US$6.1 billion) off operating profit for parent company EADS.
Streiff's comments, in an interview with French daily Le Monde, appeared as a tentative challenge to the traditional balance among national interests within Airbus. Work on new programs is usually spread across sites in France, Germany, Britain and Spain.
But it is the Franco-German rivalry at Airbus' heart that often poses the biggest stumbling block _ as its recent string of leadership crises illustrates.
Airbus is "looking at all ideas," Streiff said, when asked whether he planned to transfer A380 work to Toulouse from the company's paintshop, cabin-fitting plant and delivery center in Hamburg. He said a decision will be made within four months "in the best interest of Airbus."
The new A350 could be assembled at an existing facility to save costs, Streiff also said. "We could imagine assembling it in Toulouse and transferring the A330 and A340 to Hamburg," he said, referring to widebody Airbus jets already in production.
His musings are bound to raise concern in Germany, where politicians had already expressed alarm that promised Airbus restructuring could cut jobs at the Hamburg plant and among local suppliers.
EADS co-CEO Tom Enders pledged to maintain a "balance" between Airbus operations in the two countries following talks Thursday with German Economy Minister Michael Glos and Hamburg Mayor Ole von Beust _ who said they had been reassured.
Shares in European Aeronautic Defence and Space Co., which have fallen more than 38 percent from their March 13 peak, lost another 3 percent Thursday to close at euro21.05 (US$26.70) amid concern about possible A380 order cancellations and the company's ability to meet the additional euro2 billion (US$2.54 billion) in annual cost savings promised this week and other program goals.
In a separate interview with the Financial Times, Streiff said the development timetable for Airbus' A400M military transport plane was "on the edge" and the program unprofitable. "We have not yet found the right cost base to get to profitability targets," he said.
Enders also said Thursday that the A350's future could be in doubt. "We will discuss intensively in the next weeks whether we have the financial and engineering resources to actually take on this program," he told a news conference in Germany.
After concentrating massive management resources on its flagship A380, Airbus has been wrongfooted by Boeing's four-engine 787, which delivers better fuel economy than older twin-engined Airbus jets in the same size category _ a sales argument that has grown more persuasive with higher fuel prices.
The new A350, announced at July's Farnborough Air Show, is "crucial to the development of Airbus," Streiff also said in the interview. "It's difficult to imagine being absent from a segment that represents 40 percent of the market by value."
Analysts had already warned that the financial squeeze on EADS, exacerbated by the weaker U.S. dollar, could compromise its ability to fund the euro8 billion (US$10 billion) A350 program. EADS is also paying euro2.75 billion (US$3.5 billion) to acquire the 20 percent of Airbus it does not already own from Britain's BAE Systems PLC, whose shareholders approved the sale this week.
"We still feel that visibility on the stock is very limited and that there will be more bad news in the weeks to come," said Harald Liberge-Dondoux of CM-CIC Securities. "The cancellation of a large number of A380 orders would put the program in an even more difficult situation."
Airbus is still negotiating with airlines on compensation, and several have hinted they may cancel, including Dubai-based Emirates _ the biggest A380 customer with a 45-plane order worth US$13 billion (euro10.2 billion) at list prices. The board of Virgin Atlantic Airways meets next Thursday to discuss the future of its contract for six superjumbos.


Updated : 2021-01-21 01:01 GMT+08:00