Production glitches send Airbus into a tailspin
Photo: KEVIN COOMBS/Reuters/Landov
An Airbus A380 superjumbo airliner is put together at the Jean Luc Lagardere assembly line in Toulouse. Sections of the fuselage were built in Hamburg.
What has gone so badly amiss at Europe’s Airbus manufacturing consortium and with its A380 superjumbo airliner? Just a year and a half ago, when the A380 made a dramatic demonstration flight at the Paris Air Show, Airbus seemed to have the world in its hands. For the second year in a row, it was outdistancing Boeing in obtaining new aircraft orders, and it had nearly 160 orders for the A380 in hand.
Then suddenly just about everything that could go wrong did go wrong. The announcement of A380 production delays last June sent Airbus shares tumbling—the one-day drop was comparable to Enron’s following the disclosure of that company’s off-the-book partnerships. After further A380 production delays were announced at the end of September, several major companies canceled or delayed standing orders: Virgin Atlantic pushed back its purchase of six A380s for four years, for example, and FedEx said it would buy 15 Boeing 777 freighters rather than the 10 of the A380 freighter version it had planned to get from Airbus. Meanwhile, British BAE Systems got rid of the 20 percent share it had in EADS, the parent company of Airbus [see timeline, ”Airbus’s Wild Ride”].
Until the middle of last year, Airbus was making what seemed a compelling case for its double-decker, US $300 million plane, which could accommodate 550 to 800 passengers. The long distances between the established advanced industrial countries and the emergent economies of East Asia, together with the growing role of the Middle East’s oil-rich states, suggested that there would be plenty of buyers for a big, luxurious, hub-to-hub cruiser. But there always were some naysayers whispering that perhaps the whole project was misguided, and those voices got louder in 2005 and early 2006 as a strong euro continued to give non-European competitors an edge in world markets and Airbus’s archrival Boeing undertook a thoroughgoing reorganization.
The disclosure of the first A380 production delays in June induced an instant collapse in confidence. Noël Forgeard, the chief executive of EADS, and Airbus CEO Gustav Humbert both promptly resigned. Louis Gallois took over the leadership of EADS, and into Humbert’s shoes stepped the outspoken Christian Streiff, a French national and an outsider to aerospace, who previously had led France’s highly successful Saint-Gobain Group.
Streiff drew up a restructuring plan for Airbus called Power8, in which the main thrust was to reduce airliner manufacturing costs by 30 percent and to streamline the A380 construction process. He reportedly wanted to do something about the split assembly of the A380: sections of the fuselage are made in Hamburg but then transported to Toulouse, where much of France’s aerospace industry is located, for the plane to be put together [see photo, ”Final Assembly”].
Streiff evidently was goring too many sacred cows. In October, while the ink was still drying on Power8 and even as further production delays of up to a year were announced, he was dismissed—largely at Germany’s behest—and Gallois moved into his position. The continuing turmoil at the top engendered still more doubts about whether the company’s problems were mainly technical, managerial, or political, about what it would take to fix the company, and even about whether the A380 itself might be endangered.
Visitors to the Farnborough, England, air show got a peek at the A380’s complicated wiring.
The immediate and biggest causes of the A380 production delays arose from design changes to the plane’s 500 kilometers of wiring [see photo, ”Tangle”]. In contrast to earlier Airbus planes, the A380 has wiring made of aluminum rather than copper, but aluminum bends less well and therefore posed new challenges. Aggravating the difficulties that arose from the use of aluminum was the willingness of Airbus to customize interiors for each major customer, so that wiring had to be handled differently for each group of airliners.
However, contrary to reports that Airbus had switched from an original plan to use copper wiring, causing midcourse complications, Airbus sources tell IEEE Spectrum that aluminum always was the intended material.
The wiring problems in any event brought to light an underlying serious defect in the way the multinational consortium was functioning. Engineers in Germany and Spain used an older version of a CAD program, CATIA 4, written in Fortran and running on a Unix operating system, instead of the CATIA 5 version, written in C++ and running on Microsoft Windows, used in France and Great Britain.
Although the developer of the software, Dassault Systèmes, maintains that the two versions are compatible, Airbus reported that problems arose in Hamburg: specifically, data got lost in transferring files from one system to the other. Further, though the technicians in France were already familiar with CATIA, having used it to design the A340, the Germans had limited experience with the design system.
At least partly because of those factors, problems arose incorporating wiring design changes in the fuselage sections built in Germany. But not everybody by any means considers the software incompatibilities an adequate excuse. Jürgen Thomas, a former chief engineer of the A380, told a German trade publication he was shocked that in Hamburg, where the planes are wired, ”absolutely nobody has taken any responsibility.”
What happened in Hamburg certainly was not just a technical problem in the narrow sense. ”It was an execution failure,” connected with ”their lack of integration in engineering,” says Nick Cunningham, an analyst at the brokerage firm Panmure Gordon & Co., in London.
Agreeing, aerospace analyst John J. Nance, based in Tacoma, Wash., argues that the A380 delays were not really delays at all, in the strict sense of the word. The real problem, he says, was an underestimation of the time it takes to develop a highly technical and complex project combined with aggressive marketing ploys. He blames specifically Forgeard, who became co-CEO (with Thomas Enders) of EADS, in 2005, after having been at the helm of Airbus since 2001, and who oversaw the development of the A380 from its beginning.
”Forgeard had an attitude of institutional hubris,” says Nance. ”Assumptions were made and not tested. Sales and production schedules were put out there that were more a result of management philosophy and pressure than of an actual technical [approach].”
In particular, selling the aircraft and promising delivery dates before the plane was truly ready was a critical mistake, as Nance sees it. ”There is a tremendous difference between [saying], ’Look, we are going to do this right, however much time it takes,’ and saying, ’We are going to do this, we are going to be on schedule, and that is your task.’ ”
To be fair , Boeing could also stand accused of selling a plane it doesn’t exactly have, and of riding herd on its network of subcontractors to meet specifications and schedules that may or may not turn out to be realistic. It has garnered more than 455 orders for its 787 Dreamliner, a large, fuel-efficient long-distance twin-engine airliner with a composite fuselage. But the Dreamliner is expected to enter service only in 2008—about a year after the first A380 starts carrying passengers for Singapore Airlines.
In addition to that midsize plane, Boeing’s newest stretched version of the venerable 747—the 747-800—will be able to carry nearly as many passengers as the A380, and may be about as economical on a per-seat basis, according to Pierre Sparaco, an independent Airbus analyst in Toulouse.
Ironically, observes London analyst Cunningham, Boeing will be using a large number of subcontractors to assemble parts of the 787 Dreamliner in different countries, much as Airbus does. But it’s been working all out to manage this system efficiently, Cunningham feels. ”Boeing hasn’t just sat there benefiting from the weak [U.S.] currency,” he says. ”Boeing has been pushing hard to change itself as well.”
Cunningham argues that Airbus needs to unsentimentally select lowest-cost subcontractors the same way Boeing does—and focus more on the single-aisle planes that have been its greatest success. But that kind of reorientation is strongly resisted by the company’s dominant partners, France and Germany.
Airbus emerged in its current unwieldy form from the merger in 2000 of three nationally owned companies, France’s Aérospatiale Matra, Germany’s DaimlerChrysler Aerospace, and Spain’s Casa, to form the European Aeronautics Defence and Space Co. By 2005, EADS had 113 210 employees and annual revenues of 34.2 billion. Its Airbus division had 55 000 employees working at 16 sites in four countries. To satisfy the major German and French shareholders, most major managerial functions were duplicated, both at EADS and Airbus.
An absence of confidence will surely continue to dog Airbus, as long as glaring issues about its basic structure go unaddressed. ”There was a rivalry between states and not [just] managers,” observes Isabelle Bourgeois, a researcher at CIRAC, a research center near Paris that studies contemporary Germany. Already in June, she says, the company’s board should have recognized that a managerial and national incompatibility ”had always existed.”
Yet the short and troubled tenure of Streiff strongly suggests that this message has yet to be absorbed at the top levels of political management. Gallois has said that he will stick to the main lines of Streiff’s Power8, and he is considered a more skillful and possibly a more effective political player. But it’s to be assumed that his approach to management restructuring will be less radical.
As for Streiff, he hasn’t minced his words: ”It will take Airbus 10 years to catch up with Boeing,” he told France’s leading newspaper Le Monde .
Could Airbus go under? Nobody seems to think so quite. ”If you have got a company as big, as vital, and as important as Airbus has become, in everything from employment and balance of payments to the product, collapse is not a possibility,” argues Nance. Cunningham agrees—”provided they don’t make any horrible mistake on a strategic basis, particularly in terms of products.”