Uncertain times take Airbus back to the drawing board

It was a surprise not to see Airbus' legendary sales boss John Leahy sitting on the podium at the company's Singapore Air Show press briefing last week: In his place was his successor Eric Schulz.

After more than 30 years at Airbus, where Leahy played a key role in turning the European aircraft-making consortium from a newcomer into the global market leader, the 67-year-old New Yorker has sold his villa in Toulouse and is moving back home.

His French successor, who is 10 years younger, comes from the engine manufacturer Rolls Royce and has yet to show that he can fill the huge footsteps left by Leahy.

This week, another Airbus heavyweight will make his last major appearance. Fabrice Bregier (56), the head of the firm’s commercial aircraft division, will present the Airbus’ financial results for 2017 on Thursday in Toulouse, before leaving the aircraft manufacturer later in the month.

Unlike John Leahy, whose doctors have urged to adapt a healthier lifestyle after persistent heart problems, Bregier is leaving because he failed in his bid to succeed the German CEO Tom Enders (59), who in turn will wrap up more than a decade at the helm in April 2019.

Enders has led Airbus since 2012 and retires in April 2019

Turbulent times for new management

The current turbulence being felt in Toulouse is probably the biggest upheaval in Airbus' 48-year history.

Both Enders and Brégier find themselves in the spotlight of investigators following massive allegations of corruption against Airbus' military and civilian operations, although so far no personal misconduct has been proven.

In November, a raid took place at Airbus' Paris offices in connection with a probe into a satellite business with Kazakhstan in 2010. Enders by then had already prepared his staff to expect "hard and turbulent times.". "We need fresh faces for the 2020s," he told them.

Bregiers will be replaced by the former head of Airbus’ helicopter division, Guillaume Faury (49). That will ensure the delicate balance of German and French control at the top of Airbus will be maintained. But whether Ender's successor will be German remains uncertain.

Enders had always endeavored to change the small-minded national mindset at Airbus, but achieved only moderate success. He moved the corporate headquarters from Munich to Toulouse and put its Paris office up for sale, ignoring the disquiet in political circles. But he has not been able to completely stop many of the national resentments that still fester within the group.

Insiders hope that Enders, in his remaining year in charge and with more autonomy than ever, will be able to force through further integration measures, and set the company on a firm footing for the future.

Pictures of Airbus A380 plane and a Boeing 747 at Frankfurt Airport, Germany.

The competitors: An Airbus A380 (front) and a Boeing 747 on the tarmac at Germany's Frankfurt Airport

Airbus and Boeing's eternal duel

The corruption charges, internal squabbles, and now the changes at the top of Airbus, have diverted attention internally. As a result, some staff are unsettled.

Some industry insiders fear that the aircraft maker has allowed its succession plans to detract from important issues, especially the troubles in its commercial aircraft division.

But the fact is, Airbus had a surprisingly successful year in 2017, largely due to major year-end sales. In December 2017 alone, Airbus took 776 firm orders following the Dubai Air Show, more than in 2016 as a whole.

Overall, Airbus ended 2017 with 1,109 orders, far ahead of Boeing with 912, maintaining an advance that Airbus has kept for years and years.

Airbus has, however, traditionally often lagged Boeing in terms of aircraft delivered, as it did again in 2017. The Europeans delivered a total of 718 jets from their factories in Toulouse; Hamburg; Mobile, Alabama; and Tianjin, China, compared to the 763 aircraft that left Boeing's.

Picture showing Sheikh Ahmed bin Saeed Al Maktoum and John Leahy at signing a contract

In January, Emirates boss Sheikh Ahmed bin Saeed Al Maktoum (left) and John Leahy, Airbus' sales chief, signed the letter of intent to buy 36 A380 aircraft

A380: saved for the time being

Before leaving, outgoing sales chief Leahy had not only posted the biggest order of all time at the Dubai Air Show — 430 aircraft at a total list price of nearly $50 billion (€45 billion) for the US investment firm Indigo and four affiliated airlines. But in January the firm revealed a significant deal for the ailing A380, the world's largest passenger plane.

After Emirates Airline refused to sign a contract to buy more A380s, Leahy threatened the double-decker plane’s biggest customer publicly by announcing that the entire A380 program would have to be discontinued without an Emirates order.

Just a few days later, Emirates signed a letter of intent to buy 36 of the giant planes (20 directly with the option to buy another 16). The deal was finalized in Abu Dhabi earlier this week.

The deal has saved the A380 program for now, which means production is likely to continue for at least the next ten years.

Even so, the A380 urgently needs more customers to ensure long-term sustainable rates of production. This year, only 12 will be produced, and in 2019 only eight.

But before that, on February 20, Qatar Airways — Emirates' biggest competitor in the Persian Gulf — will be welcomed to Toulouse. The Qataris are the launch client for the stretched version of the Airbus A350, the A350-1000.

With just under 370 passengers in two classes, the longer A350 can carry around 40 more passengers than the original model, and is designed to compete with the new versions of the Boeing 777.

However, orders for the A350-1000 are at a standstill. Customers have repeatedly migrated to the smaller base model and the -1000's order book shrank from 211 to 169 units.

That leaves sales boss Eric Schulz with a huge mountain to climb to show that he can handle the role with as much virtuosity as his legendary predecessor Leahy.

The Airbus A380 a birthday kid with wrinkles
The giant
The A380 is simply impressive and puts almost every other competitor on the airfield in the shadow — literally. With a length of 72.7 meters (238 feet) the plane has a wingspan of 79.8 meters and is over 24 meters tall. On its two decks, the airline Emirates can accommodate 489 passengers in its three-class extra-wide-room version, and up to 615 passengers in its two-class long-range model.
The Airbus A380 a birthday kid with wrinkles
The first landing
On April 27, 2005 the first official flight of the giant took place. After 3 hours and 54 minutes in the air, it landed safely. At the time it seemed inconceivable to fly with less than four engines. Since then it has become clear that a mere two turbines are enough to carry such giants — and for significantly less money. Yet developing this technology would likely run into the billions.
The Airbus A380 a birthday kid with wrinkles
The original
Singapore Airlines was the first airline to deploy the A380. Here the proud new owners are shown on the tarmac in Toulouse — gathered together to document the great day. Back then on October 15, 2007, the future of passenger flying was still seen in terms of size: The more passengers transported at once, the more profit for the airline.
The Airbus A380 a birthday kid with wrinkles
The beginning of an era?
The giant passenger jet was also well received by travelers. They weren't bothered that the boarding of so many passengers sometimes took a bit longer. However, the infrastructure of most airports is overwhelmed by the gigantic A380. For this reason, the aircraft flies most frequently between major airports like London, Frankfurt, New York and Singapore.
The Airbus A380 a birthday kid with wrinkles
A Herculean task
It's not just competitors like Boeing that make life for Airbus difficult. The company's own structure is demanding and hinders streamlining. Individual components for the aircraft are manufactured in France, Germany, Spain, Great Britain, China and the USA. That's why the body of a giant A380 can be seen on a country road once in a while.
The Airbus A380 a birthday kid with wrinkles
A worrying trend
Naturally, smaller planes are selling better than mega aircraft like the A380 — here the shell of the first model. Despite this commonly acknowledged fact, declining sales figures are a cause for concern. Last year only 28 A380s were delivered. This year it will be 15. Next year only 12 will leave the workshop. By 2019, Airbus only expects to deliver eight.
The Airbus A380 a birthday kid with wrinkles
The end of an era?
Whatever the future of the A380 will actually look like, it is certain that Airbus has just ended a successful era. At the end of this year, the company's chief salesman, John Leahy, will retire. In his 23 years, he had been able to sell 15,500 aircraft for around $1.7 trillion. His successor will be measured by this — sales of more A380s would be helpful in any case.
The Airbus A380 a birthday kid with wrinkles
An uncertain future
Airbus isn't the only one worried about mega planes. Its competitor Boeing only builds around six of its jumbo jets a year — and they are used for cargo. Yet the outgoing Airbus salesman John Leahy is nonetheless certain that passenger numbers will double. He sees the problem on the ground and not with the A380, complaining that airports need to be prepared. Maybe the A380 does have a future.
Author: Dirk Kaufmann (tr)