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New team pledges to tackle Airbus problems

European defense group EADS vowed Monday to put Franco-German management tensions behind it and resolve the crisis at Airbus, the day after the French CEO and the civil jet unit’s German head lost their jobs in a much-anticipated shake-up.
/ Source: The Associated Press

The new management of Airbus on Monday vowed to repair strategic and operational problems dogging the European plane maker after a weekend shake-up at parent company EADS that forced out two top executives.

With Airbus already losing ground to its U.S. rival, the new team has just days to take decisive action if they are to avoid a further loss of credibility for the company, analysts say.

Louis Gallois, who replaced Noel Forgeard as France’s top executive at EADS, issued a joint statement with his German co-CEO Tom Enders, who survived the reshuffle, pledging to make a “recovery” at Airbus the top priority.

“We’ll work hard and we’ll work jointly to bring EADS back on course,” the statement said.

The crisis at the defense and aerospace group followed its announcement last month that its 555-seat A380 superjumbo was likely to suffer fresh delays of up to seven months.

The revelation caused EADS shares to plunge 26 percent on June 14, and France’s Financial Markets Authority said it was investigating Forgeard and five other directors who sold EADS stock just weeks before the company ordered an internal assessment of the production problems.

But concern had already been mounting among Airbus shareholders and employees after top officials recognized that they had underestimated the threat from rival Boeing Co. in the middle of the market.

Airbus has received only 100 orders for its planned A350 jet, billed as a mid-sized, long-range, fuel-efficient rival to the Boeing 787 Dreamliner, which has 350 orders. Toulouse, France-based Airbus is widely expected to announce a more ambitious redesign at Britain’s Farnborough Air Show, which opens in two weeks.

“It’s clear that’s what the market wants,” said an official close to the plane maker, who asked not to be identified because the plans for the program are confidential. An EADS spokesman declined to comment.

Christian Streiff, named Sunday to replace ousted Airbus CEO Gustav Humbert, would be signing up to a decision he had little or no role in preparing, industry observers point out — but one which could be make-or-break for Airbus’ attempts to remain a serious rival to Boeing.

Streiff, a former executive with building materials company Saint Gobain, could find it difficult to take the lead on such a major decision in his first two weeks “given that he doesn’t know the aircraft market personally,” said Agnes Blazy, an analyst with CM-CIC Securities in Paris. “A collegiate decision will therefore have to be taken.”

Streiff’s appointment coincides with moves by EADS to impose tighter supervision on Airbus, as it acquires Britain’s BAE System’s 20 percent of the jet maker.

But the shake-up stopped short of making changes to the split Franco-German structure at EADS, which divides board and management posts scrupulously between the French shareholders — the government and Lagardere SCA — and Germany’s DaimlerChrysler AG.

“This is not the way normal companies are run,” said Richard Aboulafia, an aerospace analyst with U.S. consultancy Teal Group. “But this is the best they could do given the time they had.”

Shares in European Aeronautic Defence and Space Co. closed 0.8 percent lower at 22.28 euros ($28.32) on Monday, after N.M. Rothschild published a valuation of Airbus that was on the low side of expectations.

The investment bank was called in after BAE failed to agree on a price for its Airbus stake with EADS. In London, BAE shares ended 3.3 percent lower at 358 pence (5.18 euros; $6.59).

Airbus sold more planes than Boeing for a fifth straight year in 2005, but fell behind its U.S. rival in the market for larger, more profitable jets. This year, Airbus had won 105 new orders as of May 31, to Boeing’s 358.

A major upgrade to the planned A350 could double the estimated 4.5 billion euros ($5.7 billion) budget, analysts say, and push back its entry into service to at least 2012 — two years behind its original target date and four years behind the 787.

To give the program a fresh start, Airbus is seen as likely to give the plane an all-new model name, and Teal’s Aboulafia is betting on “A370”, like most other analysts.

A360 is not the kind of name you give to a jet that’s already been back to the drawing board twice, he quipped. “It has turn-around-in-circles connotations.”