Influencia Echo Columns

Only a year and a half ago, the advent of the A380 was triumphantly announced. Today, Airbus is on the verge of bankruptcy.

The French press has been faithfully recounting the various incidents plaguing the European planemaker. Media coverage has largely focused on the company's restructuring and downsizing, but also on Louis Gallois' appointment, following Christian Streiff's resignation who had strived for greater autonomy from EADS, its parent company. The media were quick to report on Mr. Streiff's disapproval of Airbus management, highlighting the fact that the break-even point of the Airbus 380 program had gone up. As of now, the company has to sell at least 420 of the super-jumbo planes, against the 270 initially planned.

Following the announcement that there would be a further delay in deliveries of the first A380s, the media reported on the reactions of the airline companies which had ordered the super-jumbo. FedEx Express cancelled its order for the freight version of the A380 while Quantas confirmed its order. Confirmations of orders from Singapore Airlines (the company which launched the A380), UPS and IFLC should be maintained, while Virgin Atlantic has extended its delivery date to another four years. The press also mentioned that certain unnamed companies were likely to demand penalties for late delivery from Airbus.

The media analysed the reasons for Airbus's descent into hell, highlighting four points which explained its downward spiral. One of the major causes is its managerial crisis: in the past 18 months, Airbus has had three different bosses. The second cause is the crisis among its legendary shareholders - EADS, Lagardère and Daimler-Chrysler who jointly sold up to 7.5% in share capital in April 2006, followed by BAE Systems who sold its 20% share. Thirdly, the tensions between the French and the Germans ended in a task-sharing procedure which has not made things any easier: Toulouse has been made responsible for the final assembly while Hamburg is now in charge of painting and interior design

Lastly, Airbus seems to be relying too heavily on its aging A320s, and its A340s are facing stiff competition from Boeing's 777s, judged to be more economical by some airline companies.

The press reported at length on the consequences of the Airbus crisis on the Midi-Pyrénées region, and more specifically on its imperilled sub-contractors. It also mentioned the French governement's financial aid of 145 million euros and the German governement's apprehension about job protection on its national sites.

All eyes are now on Toulouse with the hope that the new management team will be able to bring some peace and tranquility to the European showpiece. The question is, will it be enough?



Analysis by Sylvie Testard-Ramírez, Managing Director of Echo Research. www.echoResearch.com.