Airbus obsessives have a shaky grasp of history

No plane no gain.

Suddenly, everyone wants to be like Airbus. In recent months, Renault CEO Luca de Meo has called for an “Airbus of autos” to face down  threat to European carmakers from Chinese electric vehicles. In March, boss of German utility E.ON was fielding questions about merits of a pan-European mega-utility that could be “Airbus of energy”. Military specialists antsy about Europe’s highly fragmented defence industry have even been pondering an “Airbus of defence”. That raises two questions – what this outbreak of sloganising actually means; and wher any of new Airbus obsessives know full extent of its tortuous back story.

It’s certainly true that 2024 incarnation of Airbus is flying high. $140 billion pan-European planemaker’s orders and profits are taking off amid turbulence at U.S. rival Boeing. company led by CEO Guillaume Faury has seen commercial aircraft deliveries outpace its U.S. rival every year since 2019. Consolidated net income for 2023 came in at 3.8 billion euros while Boeing suffered a roughly $2 billion net loss. Airbus’s year-end commercial order backlog of 8,598 planes is over 2,000 ahe of its competitor. A dece ago, European group’s le was around 500.

It’s also true that Airbus – whose over 50-year history has encompassed public and private owners in major European economies like Germany, France and UK – makes for an appealing template. Chinese carmakers like BYD are threatening to eat ir European counterparts’ lunch by flooding market with cheaper EVs. If likes of Renault, Stellantis and Volkswagen were to merge operations in some sort of Airbus clone, each entity would take on less individual risk and share much-needed expertise, while creating economies of scale in production that might produce a cost-competitive European electric car. Airbus was after all born from a similar state of panic about overseas competition: in 1960s European aerospace companies feared U.S. rivals like Boeing and Lockheed would send m out of business. At a time when governments are actively meddling in market, an example of bureaucrats helping to create a globally successful company has clear appeal.

Yet such enthusiasts would benefit from closer study of Airbus’s history. It was only a dece ago that company assumed its current form, where state and state-aligned investors only hold minority stakes and board is mostly independent from government. “Airbus Industrie” was formed in 1970 by German and French consortiums with Spanish and British investors coming later. But it did not turn an operating profit until  1990s, when massive investments and success of A320 plane began to pay off. In early 2000s three contributors – France’s Aerospatiale Matra, Spain’s CASA and Germany’s DaimlerChrysler Aerospace – merged to form European Aeronautic Defence and Space Company. ES was to control 80% of Airbus planemaking outfit, with UK’s BAE Systems holding remaining 20%. But dece that followed demonstrated difficulties of getting a complex pan-European project off ground.

2000 merger left culture and processes of what were previously independent national firms largely intact. This compromise reached its nir in quest to build A380 superjumbo, first of which was delivered in October 2007, 18 months late and several billion dollars over budget. It didn’t help that A380’s wings were designed and produced in United Kingdom, fuselage sections came from Germany, and final assembly took place in France before plane was flown back to Germany to have its body painted and its cabin customised. real problem, however, was that when problems inevitably emerged in what was a complex design, national rivals did not fully disclose m to management until it was too late. ES’ practice of appointing joint chief executives like Tom Enders and Louis Gallois – one German, one French – arguably perpetuated national power struggles.

Airbus eventually sorted itself out: ES bought out  20% BAE stake in 2006, streamlining company, and eventually decided to rebrand as Airbus seven years later. But its current health reflects a host of idiosyncratic features. gigantic upfront costs involved in making each new aircraft better than last – with no concrete guarantee airlines will buy m – mean that planemaking tends towards oligopoly. It is also a global market, with airlines around world choosing from a handful of different models. By contrast, European carmakers alrey make viable battery-powered vehicles – y just need to be cheaper. Autos are also fiercely location-dependent: Volkswagen is Germany’s bestselling car brand and has obligations to workers and people of Lower Saxony; French drivers are more likely to buy a Renault. Cross-border M&A would refore be much harder to pull off, and risk repeating some of national wrangling that befell ES in 2000s.

or powerful support for Airbus’s rude health is sickness of its main rival. Boeing’s reputation h alrey been hit by two fatal crashes in 2018 and 2019 that killed 346 people, but it’s now also grappling with repercussions of a mid-air blowout of a door plug in early January. While Boeing undergoes a rical management shakeup, carriers such as United Airlines are closing in on securing more Airbus jets, Bloomberg reported in March citing people familiar with matter. As regulators step up factory checks, Boeing may be producing single digits of its MAX aircraft every month, Reuters reported on Wednesday citing industry sources – well below previous monthly output levels of more than 30. Yet despite Airbus’s relative success, total return on its stock has only exceeded that of its U.S. rival in last three years.

In or words, Airbus’s current health is a function of over half a century of history and some highly specific circumstances. It might still make sense for European carmakers to collaborate against threat from Chinese rivals: Automotive Cells Company, for example, founded in 2020, sees Stellantis, Mercedes-Benz and a subsidiary of TotalEnergies working toger to research, develop and produce electric vehicle batteries. Indeed, that may be kind of partnership de Meo has in mind. If so, he and or Airbus acolytes should probably come up with a better analogy.