Airbus Roils French Politics

Aircraft manufacturers regularly conduct stress testing of the vital components and systems of their new airplanes, to make certain they can withstand the forces that will come with actual use. Lately, the troubles  of Airbus have been applying a stress test to French and EU politics, and the results have been ugly.

French Prime Minister Dominique de Villepin, the poetry—writing, Napoleon—loving dandy is Is showing signs of wear. He has staked a lot of political capital  on state support of French big business threatened by international competition.

Tuesday, an uproar of 'rare intensity' caused the presiding officer in the French parliament to temporarily suspend the session as Socialists question de Villepin about delays in delivery of the A 380 Superjumbo. The AP reported: 

Left—wing lawmakers jumped from their chairs, booed and shouted ``resign, resign!'' at Prime Minister Dominique de Villepin on Tuesday during a heated parliamentary debate over financial troubles at the parent company of Airbus.

Villepin lost his temper under questioning from Socialist Party leader Francois Hollande about European Aeronautic Defence and Space Co., which has seen its stock tumble after Airbus announced delays in its much—touted A380 superjumbo jet and questions surfaced about share selloffs by top executives.

``Mr. Hollande, I denounce your facile approach — and I will even say this looking you in the eyes — the cowardice in your attitude,'' Villepin said. ``I'll say it again: cowardice.''

A Reuters report noted the in—kind response:

"He's mad," Socialist grandee Henri Emmanuelli shouted.

Parliamentary stewards had to stand guard around de Villepin as Socialist politicians advanced towards him chanting "resign."

De Villepin apparently thought better of his actions and later apologized. 

But the Prime Minister is suffering in public esteem, as his already low approval ratings moved into the low 20s. The New York Times reports:

Le Monde's cartoonist, Plantu, has drawn Mr. de Villepin on the front page as a homeless man in a cardboard box, and a disheveled bureaucrat. In other cartoons, his head is carried on a pole, French—revolution—style, by his political opponents.

For Airbus and its government backers, the news keeps getting worse. Steven Udvar—Hazy, chief executive  International Lease Finance Corporation, a highly—respected buyer and lessor of airliners has announced that his company's order for 10 A—380s may be reduced or cancelled.

"We could cancel and are considering canceling all or some of our A380 order," he said. "We're not happy and on safe ground to cancel the order."

His words carry a lot of weight with other airliner customers and manufacturers. When he announced his doubts about Airbus' proposed competitor to the Boeing 787 Dreamliner, Airbus soon cancelled its plans for an update of an older model, and announced a commitment to all—new generation model, which will takes years to engineer and cost many extra billions of euros to bring to market.

Other airliner customers have already announced their intention to seek compensation from Airbus for the late deliveries of their A 380s. 

Serious action is required, and in France that often means state subsidies, a course of action which will provoke an American response  and could end up in a nasty trade war that would benefit no one.

But de Villepin is determined: 

"There are urgent decisions to be taken, and they will be taken," Villepin told lawmakers. "The government has decided to take all necessary measures so that EADS gets on top of its production delays and supplies its customers under the best possible conditions."

The BBC reports:

These "steps" include a possible revision of the Franco—German pact that prevents state interference in Airbus. 

Franco—German relations over Airbus are none too cozy right now.The French co—CEO of EADS blames the Airbus Hamburg facility  for the most recent delay, an implicit barb at his replacement as head of Airbus, a German national.

Meanwhile, a scandal that would have caused far more outcry in the United States has developed around the exercise of stock options and sale of stock in the parent of Airbus, EADS. Noel Forgeard, French co—CEO of EADS was among six EADS executives who exercised stock options just weeks before management ordered an internal assessment of production hitches for the A380. EADS stock plummeted on the bad news, and Forgeard pocketed an extra 4 and a half million dollars in profit for himself and his family. 

Airbus and EADS have other troubles as well, in the Clearstream scandal, which just occasioned its first lawsuit, with Mr. de Villepin alleging he was libeled by the authors of a book on the subject.

And the bad news continues. Canada's conservative Prime Minister Stephen Harper has announced a deal to buy Boeing C—17 military transports, instead of Airbus' planned A 400 M military troop and cargo carrier.

While some observers still express enthusiasm for the market prospects of the A 380, others suspect ($link) that already small niche for ultra—large planes will continue to shrink, especially if Boeing's smaller 787 delivers as good or better per seat—mile costs than the 380, thanks to the new generation lightweight materials used in its fuselage and wings.

Boeing, for its part, is doing whatever it can to aggravate Airbus' relations with its airline customers. A European aviation publication was told 

Boeing is studying the possibility of lengthening its 747—8 Intercontinental passenger aircraft in response to requests from some airlines for additional capacity.

Interest is coming primarily from Asian carriers that are also evaluating the Airbus A380, which nominally seats 555 passengers in three classes, compared with 450 for the 747—8I, say industry sources.

Commenting on the potential for increasing the —8I's capacity, Boeing says:

We are having detailed discussions in terms of both the aircraft and the potential business deal, with a lot of the large global operators around the world that today operate 747—400s. The specifics on the 747—8 Intercontinental will not be finalised until firm configuration is reached.'

In other words, Boeing is telling present and potential customers for the 380 that they have another bargaining chip to use against Airbus, if delivery problems, dickering over compensation for late deliveries, or doubts over the ability of the 380 to meet its ambitious range, weight, and fuel efficiency specifications should prove too troublesome.

Nobody is yet suggesting the A 380 project could be cancelled, but its order book is only about half way to its suspected breakeven point of 300 aircraft sales. If the order book starts shrinking with cancellations, and with Airbus short of cash to finance its planned A 370 twin engine competitor to the 787, financial realities will have to be confronted.

Most people would regard such a prestige—destroying move as outright cancellation as unthinkable, something which could bring down a government.

But it has happened before, in a situation with ominous parallels for the A 380.

Following World War II, the British civil aviation industry feared the financial and market prowess of American aircraft manufacturers, who had produced swarms of long range bombers like the B—29 and B—24. The British government convened a committee under the leadership of Lord Brabazon of Tara to plan a means of asserting British leadership in the important market for long range airliners.

The Brabazon Committee came up with a plan for the world's largest airliner, which came to be known as the Brabazon. Nearly as large as a Boeing 747, the giant propeller—driven airliner was to fly the North Atlantic and other key routes for BOAC, the predecessor of today's British Airways.

Promising lounges, extra personal space, and plenty of other amenities (just as the A 380's space was hyped as an improvement in passenger comfort), a prototype was delivered and took the air in 1949, two years later than at first envisioned. But orders never materialized. The prospect of newer generation aircraft (passenger jets) and the unpromising economics of the actual performance doomed it.

The Brabazon today is known as a monument to the folly of governments subsidizing grandiose aviation prestige projects, a folly further demonstrated by the commercial failure of the Concorde SST.

The aviation world is watching the order books of Airbus with special intensity, and so, now, are French politicians and the public. The story will continue.

Hat tips to Bryan Demko, Dennis Devakis and Scott Palmer

Thomas Lifson is the editor and publisher of The American Thinker.