The Escalating Woes at Airbus (Schadenfreud)

(just my thoughts on this)

http://www.gpsworld.com/gpsworld/article/articleDetail.jsp?id=308585
http://eu.spaceref.com/news/viewpr.html?pid=18812

Well, if you think a redundant system 20 years later at a high cost is a great deal, then I think it could be defined as successful. Like the Eurofighter, another great EADS success- It too fly’s and someday may even be operational.

The Eurofighter was called Typhoon (That's when they were trying to sell it in Asia) and before that was the Jaeger 90. The plane was supposed to have been OPERATIONAL by the mid 90's. It still isn't and will not be until 2008! They threw together something because of growing public skepticism and appeased people. They even came up with a new concept called the "Tranche" which is an excuse for a non-operational plane. They rapidly fielded an non-operational airframe that still didn't have any A2G capabilities, lacked a functioning radar and basically was being finished in it's development as it sat already on a runway for people to look at and say "See, we have a plane, lets give them more of our money!”

Herkules (http://www.meinepolitik.de/herkule2.htm or http://www.at-mix.de/news/428.html or http://de.wikipedia.org/wiki/Herkules_(Bundeswehr_IT-Projekt) )- is a German clone of the US FBCB2 but it's far behind schedule, over priced and EADS basically withdrew from the project all together at this point. Total failure which can’t even be sugar coated anymore like the EF or Galileo. Complete miserable failure where EADS withdrew from.

The Tiger is behind schedule.

The NH-90 is behind schedule and running over cost.

And and and.

But EADS just keeps chugging away. Must be from all those massive A380 contracts they have. (Sarcasm)

--

Think about this.

In the real world, where most private non state supported industry lives you have things like this happen:

De Havilland - http://www.centennialofflight.gov/essay/Aerospace/DeHavilland/Aero49.htm (The Comet broke the De Havilland) This plane had material fatigue which resulted in the fuselage failing in flight and accounted for some crashes. De Havilland took a nose dive in the aerospace sector over that.

McDonald Douglas- http://en.wikipedia.org/wiki/McDonnell_Douglas_DC-10 The DC10 later was a fabulous airplane but had serious issues when new. Ultimately MD never recovered fully from this and Boeing today owns them.

But now we have Airbus. A small aircraft manufacturer in the early 80s. who also miraculously has a massive budget to develop lots of airplanes quickly (just as a side note), but imagine this: http://www.airdisaster.com/download/af320.shtml Imagine a plane full of EXECS, VIPs and high rollers from a small airplane builder pulls that off! What to know the outcome? Next year Airbus sold more airplanes!

There have been many articles written how Airbus is backed by subsidies and protected even. Most in Europe feel compelled to justify or rationalize these actions. Bottom line is that Airbus defies common sense in business. No one with a clue would state that this firm has had the success it has had because of shear “vision” or “efficiency”.

--

Lets look at it this way:

Airbus was flat out created by the governments of the consortium member states. But the model of Airbus is kind of ingenious in that it REWARDS those who subsidies it more. How can that be? Well, Airbus places its production according to who contributed or contributes how much. Basically, the bigger your contribution, the more production was placed in your country. So everyone gets a piece of the pie according to their contribution. But……. What about efficiency, low overhead, lowest cost producers, timelines etc? Well, that’s all minor petty stuff that Boeing has to worry about. A highly efficient firm fly’s their parts all across Europe so everyone can bolt their small piece to this plane. http://www.schule.de/bics/son/verkehr/flugzeug/beluga/index.htm or http://1000aircraftphotos.com/Contributions/Visschedijk/3098.htm They’re even proud of that! “Look at how inefficient we can be!”

So Spain will get a guaranteed cut of the manufacturing, as well France, Germany and the UK. It’s a game where you’re literally rewarded a percentile of the jobs/investment back according to your contribution. Production is not based on who can deliver on time or at the lowest cost and then the parts are in part put together in a logistically cumbersome and costly manner. Germany, France and Great Britain are relatively high cost to produce nations.

http://english.people.com.cn/200310/03/eng20031003_125358.shtml
http://www.chinadaily.com.cn/english/doc/2005-06/03/content_448476.htm
http://www.atimes.com/atimes/China/FI03Ad05.html

Boeing produces abroad too. But they do it to CUT costs while Airbus divides up production based on contribution of it’s consortium members contribution. Is Germany a low wage nation? Hell no! The German Auto industry is running away for all practical purposes. But then how can a firm like Airbus stay competitively priced?

1/3 of there development costs are basically paid for with quote on quote loans from the governments (At under market price) for new planes developed by Airbus. Think about that alone! You have major facilities that were built at government’s expense. You have technicians whose training was paid for by the state…… The true cost of the Airbus is not reflected in the price tag. In the end, they can compete because they get direct and indirect injections of money. In the beginning it was blatant and in complete disregard to any fair trade. Later after an agreement in 1992 (I think that was the date) they scaled the blatant unfair trade practices back a little. You have a company that defies what common sense tells you should happen, and it’s not because of their great vision in markets or their stream lined efficient manner of production.

You had and in part still have a largely closed market where some of the state run airlines basically will buy the state run airplane. The only place the A380 was “guaranteed” to sell was to the “state-run” airlines. Lufthansa was a state firm until 1996 I believe, Air France is STILL 20% or so in state hands, Airbus’s primary turbine builder was 35% private in 2000 and a state run entity: SNECMA

http://en.wikipedia.org/wiki/SNECMA One of Airbus’s turbine builders is a French state run firm.

EADS as a whole is basically a bunch of state run entities that got placed under one big umbrella. They sell some stock and a few idiots here think that makes it a “private” firm. Partially privatized, the heads of this entity are primarily former state officials or the heads of former state run entities. The boundary between government and state gets blurry here. Shear “coincidence” has it that the heads of this “private” firm are all distributed from the consortium member states. But that’s just another random coincidence in this “private” firm.

Our European friends who defend this activity basically use two techniques to argue their point: Deny everything and make counter accusations.

--

It don’t matter how you slice it. EADS is not a true public firm. Protectionism, massive subsidies have synthetically placed this firm where it is in the market. The consortium member states wanted to create this Aerospace giant and it was going to come, no matter what. If the government of Great Britain, France and Germany cut their funding, Airbus would loose market share dramatically. The only reason why Airbus can play “catch up” now with the A350 is because the member states are pledging money to pump Airbus up some more. Great Britain alone is giving around 250 million; that was publicly released. What France and Germany are giving is unclear.

I think the real question for the A380 is how huge is the market and are the predictions especially for asia true.
So everything is possible for the A380 and in terms of the new 747 we will see what the product will look like in the end. Until now they have as far as i know two orders for the freighter version. The very close realtions to japan can help Boeing here. the japanese are the biggest operator of 747 planes and boeing should really do everything to prevent Airbus from entering the japanese market.

The four engine A340 has huge problems to compete against the 777 and as you said the 787 will sell better than the A350 in the present version.

So the question is should Airbus invest additional money and time to change the A350 or should they accept a lower market share in this segment and concentrate on a complete new replacement in the future. especially the additional time would be a huge problem. The A350 will sell with longterm Airbus customers and the situation could be comparable to the 737 against the A320 at the moment. In my opinion the replacement of the A320 at the ned of the decade or even later is much more important looking at the market size and the very good position of Airbus there.

I would like to see the inside financial numbers . The developing costs of the A350 are much lower than the costs of the 787 only half the amount ( at least that what is published). So it could make sense
in terms of ROI and other financial key numbers for Airbus to accept a lower market share but these are informations that i will never get.

The problem is that my knowledge about the technical site is more than just limited. I am good at numbers but the real question is how much better the 787 is.

THis is really a very interesting business in terms of the product but also in terms of the financial site.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.