ACTUALLY, IT COULD BE WORSE...:

Airbus in Trouble as A380 Project Stalls: The super-jumbo A380 was supposed to become a symbol for Airbus's superiority and Boeing's decline. But it hasn't turned out that way. Instead, the prestige project could turn in to a symbol for the Europeans' aerospace downfall. (der Spiegel, 10/03/06)

It was January 18, 2005, a date almost everyone expected to go down in the history books in European aviation. With its €11 billion A380 project, Airbus planned to finally out-fly American competitor Boeing, long the leading force in this high-tech industry. Even at its unveiling, the A380 was more than just an airplane. It was also a symbol of what was to become Old Europe's victory over the United States.

Now the fog has dissipated, the fairies have flown away and the world's largest passenger aircraft -- 73 meters (240 feet) long and 24.1 meters (79 feet) tall -- is flying -- at least in test flights. And as expected, it has become a symbol. But not the one Europeans had been hoping for. Instead, the A380 has become emblematic of the European aviation industry's most severe economic crisis ever.

The A380 still faces some technical challenges, and correcting them will cost a lot of money and time. The first customers for the new mega-jet will not be taking delivery in 2006, as they had been promised, but presumably not until late 2007. As a result, Airbus faces the prospect of being sued for damages running into the hundreds of millions of euros. And what would happen if a major customer, the Dubai-based airline Emirates, for example, decided to cancel its order altogether? [...]

The company suffers from a chronic stalemate, as heads of state grapple for power and influence in the aviation and space group, which also produces helicopters, military aircraft and guided weapons. It's touchy terrain -- a minefield for executives and politicians alike. To make matters worse, the rules are constantly changing. [...]

As long as business went well, Airbus could afford these politically motivated decisions. But all that has changed as the entire company suffers from the problems facing the giant aircraft. If the company is forced to spend more money on and assign even more engineers to the A380 project, it will lack the necessary experts and funds to develop other aircraft models. Management is at a loss. The Airbus board apparently isn't exactly sure how much money and time the A380 will consume, nor can it accurately predict when the first aircraft will be ready for delivery. For this reason, at a meeting last Friday the supervisory board adopted a resolution to do nothing for the time being. In fact, it didn't even set a date for its next meeting.

Things couldn't be worse for Airbus. Until it resolves its problems with the A380, the company will be essentially crippled and unable to launch any major new projects. And this at a time when management should, in fact, be turning its attention to the new A350 jet -- a product meant to compete with Boeing's new long-range, fuel-efficient passenger liner, the 787.

The company can expect even more squabbling once Airbus CEO Streiff completes his restructuring plan. The plan will likely call for work on the A380, now carefully distributed among plants in Germany, Spain, France and Great Britain, to be concentrated in fewer plants -- a move that would almost certainly be met with energetic intervention by cabinet ministers and heads of state.

Airbus would stand the best chance of emerging from its crisis if it were transformed into a conventional stock corporation, and if the French and Spanish governments would withdraw from the consortium. The company could then build its aircraft in its most productive factories and reward its employees based on performance, not nationality.

...they could be test flying it in Brazil...

Posted by Orrin Judd at October 3, 2006 10:46 AM