July 28, 2011
   « Green commisars (updated) | Blog Home Page | The end of the litmus test? »
Email Friend | Print Article | | Share Share

March 2, 2007

Airbus suffers crippling blow

Brian Schwarz and Thomas Lifson
Airbus has had an eventful and terrible week, with the unveiling of the Power8 restructuring program Wednesday, followed by protests from unions and a defense from the French Prime Minister, followed by spontaneous protests and walkouts by workers throughout Europe.

Today, we have Louis Gallois, the CEO, complaining of political interference in the operations of the company, meaning the protests against his restructuring plans. But I am betting he doesn't mind the European Commission's announcement:
EU spokesman Michele Cercone told reporters that Airbus could apply to receive development aid to help bolster the company from a euro4.16 billion (US$5.5 billion) six-year EU fund set aside for research in the transport sector, which includes aeronautics. "Research programs can be used to provide some assistance," Cercone said. "We have a bigger research program in the Commission now than we had before and when it comes to aeronautics, Airbus is one of the major players in the sector, so it will be able to benefit."
Nor do I anticipate he will object if this report is true:
France stepped in yesterday with €100 million (R960 million) in new financial support for Airbus, even as the EU transport commissioner urged less state interference in the company.
But worst of all for Airbus, the company's freighter program appears to be dead. As I discussed earlier a few days ago, the sole remaining customer for the A 380F super jumbo freighter was keeping open the option to cancel; its order. Today came the announcement that UPS has pulled the plug. Unless Airbus can come up with a new freighter customer, the program is dead. AP reports:
In a statement, Atlanta-based UPS said it decided to cancel after it learned Airbus was diverting employees from the freighter program to work on its passenger plane program.

UPS said the final cancellation decision will be formally presented to Airbus on the first date specified under last week's agreement.

"We lost confidence in their ability to meet those schedules," UPS spokesman Mark Giuffre said of the A380F agreement with Airbus.
Altogether, a very, very bad week for Airbus, and for those who realize the world needs at least two viable competitors in the civil aviation sector. I will be working on a more comprehensive analysis over the weekend and perhaps beyond. There are many further aspects to the restructuring, the political and commercial reactions to it, and the competitive dynamics of the industry worth considering.

The most fascinating business in the world keeps on getting more and more interesting.

Hat tip: Otto Tisch

Posted at 7:18 PM | Email | | | Share Share
2photo.JPG