The Hits Just Keep On Coming In Five-Part "Handful of Dilemmas"

Aero-News Analysis by Kevin R.C. "Hognose" O'Brien

The news from the Paris Air Show seemed to be good for both of the airliner giants, didn't it? Everybody was impressed by the A380, the A350 drew what seemed like a suitable level of attention, and the European consortium seemed to shrug off Boeing's spate of Dreamliner announcements. Maybe not Toulouse's best show ever, but you wouldn't be writing an epitaph of Airbus these days.

Unless you were Germany's largest newsmagazine, Der Spiegel (The Mirror). Spiegel is kind of like Time or Newsweek, with much more depth, and much higher quality writing, every week. Long a secret knowledge-weapon among us German speakers, its web presence is also available in English these days, and -- this week -- it's bilingually savaging what ought to be, for a European publication, the home team.

There are no fewer than five articles on the "Airbus Geht Kaput" theme in this week's edition, covering everything from corner office politics to conceptual aeronautical design to arcana of international trade accounting.

Spiegel doesn't usually cover aviation any more than Newsweek does (although when it does, it does it with greater depth and accuracy, for what it's worth) but its series A Handful of Dilemmas For Airbus takes on the company with Teutonic thoroughness.

In the first part, "A Telenovela At The Top," we get a purported inside view of office politics and nationalism as it's played out in what's either New Europe (if you're Jacques Chirac) or Old Europe (if you're Don Rumsfeld).

As it turns out, the national balance of power makes the Airbus hierarchy subject to a constitution as intricate as Lebanon's, and like that middle eastern country, changing demographics and conditions put a lot of pressure on the institution. Airbus hasn't quite descended into thirty years of civil war yet, but the 30.2 percent owned by French interests (mostly France herself, and the Largardere media conglomerate) and the 30.2 percent owned by predominantly-German DaimlerChrysler are each pushing favorite sons for the boss role -- the French, current President and CEO Noel Forgeard, and the Germans, Gustav Enders.

In the absence of a truce, neither Forgeard nor Enders appeared at the show, where once they were planning to announce co-leadership of EADS. Who benefits from all the squabbling, Spiegel wonders, and answers itself: Boeing.

I thought the Europeans had all this Franco-German ill feeling sorted out. As Tom Lehrer put it, "We taught them a lesson back in 1918 and they've scarcely troubled us since then."

The title of the second piece is even more alarming: "Falling Behind Boeing," it says and also "Airbus A350 No Match for Dreamliner". The article is, if anything, gloomier than the title. It concludes that airlines want the all-new Boeing 787 more than Airbus's 350, which is essentially a stretched 330. "A look at the order books," Spiegel writes, makes it look like the A350 "is a day late and a euro short."

And Euros -- the money kind -- take center stage in the third article, "WTO Complaint Comes at a Bad Time for Airbus" which is unsubtly subtitled "TRADE WAR BETWEEN EUROPE AND THE US" (the caps are Spiegel's).

The article recounts the details of the latest US and Boeing case against Airbus in the World Trade Organization, and what may be more consequential to Airbus, the United States's decision to ban foreign companies that receive subsidies from US defense contracts -- right while Airbus is hoping to get a large KC135-replacement contract. This stings European amour-propre, and the authors point out that Boeing, too, has benefited from governmental aid in the USA.

Part Four goes right to the heart of modern Airbus, its unique A380. "The threat of a Mega-Flop: Will The A380 Become an Airbust?" hits the giant jet with a triple whammy of program delays, an order book only half as thick as it needs to be, and -- Klyde Morris's personal 'Bus beef -- the problem of evacuation.

The A380 will be certified for 873 souls on board, and Airbus has to demonstrate in a live test that all of them can get off the plane in 90 seconds. If the plane flunks, they get just one more chance before they have to reduce the number of seats -- playing hob with the economics of the plane, which is, after all, what attracts airline buyers.

To make it worse, the article returns to a theme from an earlier article in the series, noting that the A380 delays have resulted from and/or led to squabbling between Airbus's French and German subsidiaries.

Finally, Part Five addresses: "The Dollar Problem: How The Fluctuating Dollar Plagues Airbus."

In essence, Airbus buys mostly in Euros (including things like raw materials and labor) and sells entirely in dollars. The current weak dollar squeezes Airbus, but more generally, currency uncertainty causes no end of problems at the company. Pricing its planes in Euros would seem to be a no-brainer, but here the company is hoist on the horns of customer expectation.

One solution Airbus is considering is building a plant in the USA, which would be necessary in any case if the company was to win the tanker contract, and would be helpful in competing for other US military contracts. But, of course, the problem is never that simple. Airbus is at a disadvantage on the military contracts until the issue of trade subsidies is resolved. In a way, each of these problems interlocks with the others and makes solving any one of them orders of magnitude harder.

But is Airbus really that nearly on the ropes? Not if you remember that not long ago, Boeing was mired in a bribery scandal, then had an office sex scandal (which took down the guy brought in to clean things up after scandal #1), didn't have its permanent CEO at Paris because it hasn't got one either, and is in Chicago at least partly because of... subsidies, even if that's not what the Daley Crime Family calls it. In this business, truly, what goes around comes around.

So... why did the reporters at Spiegel write this series of Gloom Und Doom articles about Airbus? Maybe, just maybe, it goes back to the first of the series, in which the French and German execs are jockeying for power. They wouldn't just be trying to shake up the French so that the German executives win points... would they?

FMI: www.spiegel.de, www.airbus.com