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Airbus - Victim Of Their Own Success?

Fri Jun 16, 2006 12:18 am

Airbus success to become the number one airliner manufacturer is an undeniable achievement. However, the history is full of examples of companies that grew too fast, and their own success was ultimately the cause of their demiss.

I think that this is to certain extent what is happening now to Airbus.

First, the confidence in their business model, together with the reassurance of financial support from the EU, made them loose sight of the market solid business principles. They became too internally focused instead of listening to the customers. They decided to engage in a project that was as much commercially justified, as it was politically motivated. While there certainly was a business case for the A380, it was also a very "sexy" project. I'm sure that if Airbus was presented at that time with a choice of doing the A380 vs. a more modest but commercially more attractive airplane (a-la B787), they would have chosen the A380 for political reasons.

Second, I think they overestimated their technical capability. Actually, there were already signs that Airbus, while technically very capable as proven with the A32x and A330/340 product line, was reaching the limits of their talent as hinted by the performance limitations of the A340-600. Now their over-confidence in their technical capability is causing them to pay the price of the repetitive delays in A380 delivery.

Last, Airbus management forgot that they are servants to the shareholders and customers, and not kings of an empire. Both Forgeard and Leahy have displayed significant level of arrogance.

Maybe the best option for Airbus now is to scale down, re-invent itself and emerge as a smaller, but stronger company.
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RE: Airbus - Victim Of Their Own Success?

Fri Jun 16, 2006 12:27 am

Most likely Airbus will go through the internal "soul searching" Boeing did when they reached too far in the late 1990s and early 2000s.

Time is truly on Airbus' side, just as it was for Boeing. Too many people are looking at the fifteen minute trends in their speculation, but then too many people did the same for Boeing a decade ago when they ran into their problems.

A decade ago, Airbus started taking advantage of Boeing's stumbles and they reaped great benefits. Now Boeing is taking advantage of Airbus' and they too are reaping the benefits.

Like the airlines themselves, the airliner manufacturers fortunes and finances are cyclical in nature. For now, it is Boeing's time to be on top and reap the benefits of their product line, just as Airbus did earlier.
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RE: Airbus - Victim Of Their Own Success?

Fri Jun 16, 2006 12:32 am

My thinking is along these lines, though perhaps less drastic.

Airbus did indeed underestimate the gargantuan nature of the 380, but that, I don't think, is the key issue. The problems they face are normal for a company in a strong growth cycle, and rather than scaling down, they should be aggressively ramping up their efforts, pulling political and financial strings, and striking out for gold: delivering the best A380 possible in the shortest time possible to satisfy the customers.

A company is judged, in my opinion, not on its performance diring good times but rather on its ability to navigate safely through hard times and see the way forward. Lets not forget that Boeing "bet the farm" on the 747, and nearly died as a result of unbearable financial pressure and the usual technical problems and delays. Boeing endeared itself to many airlines and the industry as a whole by bucking up, pulling strings and getting the job done.

Eads should do the same. Its 100% time now, not time to scale back.

oh please let there never be cell phones in airliners...