Air bus

Thousands of jobs could be shed by British Aerospace and its three partners in Airbus Industrie under plans for a radical overhaul of the European aircraft manufacturer. Proposals for restructuring the consortium with the eventual aim of turning it into a conventional public company will be presented to the Airbus board in late June. The four partners employ about 30,000 in Britain, France, Germany and Spain. Jean Pierson, Airbus managing director, said yesterday that the restructuring could enable it to make large cost savings of up to 20 per cent, making Airbus more competitive with its American rival Boeing. This could entail up to 6,000 job losses across the board, including more than 1,000 in Britain, but Airbus executives would not be drawn on the numbers. Mr Pierson said the biggest scope for cost-savings was in the ranks of white collar staff where there was vast duplication of activities such as purchasing. British Aerospace employs around 7,000 directly on Airbus work at two main sites in Bristol and Chester, but the total number of jobs in Britain dependent on Airbus work is put at 25,000. A 20 per cent cost reduction could result in up to 1,500 job losses in the UK. A further 8,000 workers are employed by Aerospatiale in France. The two other partners are Deutsche Aerospace and Casa of Spain. Airbus employs 2,000 people in Toulouse. The report on the restructuring of the consortium, drawn up by Airbus chairman Edzard Reuter will set out several options. These will range from retaining Airbus as a group of economic interests (GEI) to a much more fundamental overhaul whereby the four partners become equity shareholders in a conventionally structured company. Another option is to create an intermediate structure short of full plc status. Mr Pierson ruled out a flotation of Airbus in the foreseeable future. Under the present structure the workload of Airbus is parcelled out according to the shareholdings of each partner. BAe, which has a 20 per cent stake, makes aircraft wings. But this has been criticised as an unwieldy and inefficient system that increases costs massively. Converting Airbus into a plc would allow it to award work on the basis of competitive tendering. Crucial issues still to be resolved include what assets each partner would put in, how they would be valued and what overall authority Airbus would have. Germany has already warned that it will not help fund the next Airbus project, the $8bn (pounds 5.3bn) development of a 500-plus seater super-jumbo, unless the consortium is restructured. BAe has been pressing for Airbus to become a plc for nearly a decade. With Aerospatiale now apparently also committed to overhauling Airbus Mr Pierson said support for change was becoming overwhelming. "We are in the last hundred yards of the race and we are approaching crucial decisions," he said. "The enthusiasm is there now whereas 10 years ago there wasn't the spirit. Now all that has changed. The competition is tougher not just on price but on product and service and we have reached the point where

everyone realises it is time to do something." Cost-cutting would be concentrated on the Airbus "bureaucracy".

Airbus A380 vs Boeing 747

Cross-section comparison of the Airbus A380 and the Boeing 747-400

The wide-body Boeing 747-8, the latest modification of Boeing's largest airliner, is notably in direct competition on long-haul routes with the A380, a full-length double-deck aircraft now in service. For airlines seeking very large passenger airliners, the two have been pitched as competitors on various occasions. Following another delay to the A380 programme in October 2006, FedEx and the United Parcel Service canceled their orders for the A380-800 freighter. Some A380 launch customers deferred [2][3] delivery or considered switching to the 747-8 and 777F aircraft. Boeing's advertising claims the 747-8I to be over 10% lighter per seat and have 11% less fuel consumption per passenger, with a trip-cost reduction of 21% and a seat-mile cost reduction of more than 6%, compared to the A380. The 747-8F's empty weight is expected to be 80 tonnes (88 tons) lighter and 24% lower fuel burnt per ton with 21% lower trip costs and 23% lower ton-mile costs than the [4] A380F. On the other side, Airbus' advertising claims the A380 to have 8% less fuel consumption per passenger than the 747-8I and emphasizes the longer range of the A380 while using up to 17% shorter [5] runways. In order to counter the perceived strength of the 747-8I, from 2012 Airbus will offer, as an option, improved maximum take-off weight allowing for a better payload/range performance. The precise size of the increase in maximum take-off weight is still unknown. British Airways and Emirates will be the [6] first customers to take this offer. As of April 2009 no airline has canceled an order for the passenger version of the A380. Boeing currently has only three commercial airline orders for the 747[7] 8I: Lufthansa (20), Korean Airlines (5) and Arik Air (2). [edit]EADS

A330 MRTT - Northrop Grumman KC-45A vs Boeing KC-767

The announcement in March 2008 that Boeing had lost a US$40 billion refuelling aircraft contract to Northrop Grumman and Airbus for the EADS/Northrop Grumman KC-45 with the United States Air [8] Force drew angry protests in the United States Congress. Upon review of Boeing's protest, the Government Accountability Office ruled in favor of Boeing and ordered the USAF to recompete the contract. Later, the entire call for aircraft was rescheduled, then canceled, with a new call decided upon in March 2010. Boeing later won the contest, with a lower price, on February 24, 2011. The price was so low some in the media believe Boeing would take a loss on the deal; they also speculated that the company could [10] perhaps break even with maintenance and spare parts contracts. In July 2011, it was revealed that projected development costs rose $1.4bn and will exceed the $4.9bn contract cap by $300m. For the first
[9]

$1bn increase (from the award price to the cap), the U.S. government would be responsible for $600m under a 60/40 government/Boeing split. With Boeing being wholly responsible for the additional $300m [11][12][13][clarification ceiling breach, Boeing would be responsible for a total of $700m of the additional cost.
needed]

[edit]Competition [edit]Competition

and comparison
by outsourcing

Because many of the worlds airlines are wholly or partially government owned, aircraft procurement decisions are often taken according to political criteria in addition to commercial ones. Boeing and Airbus seek to exploit this by subcontracting production of aircraft components or assemblies to manufacturers in countries of strategic importance in order to gain a competitive advantage. For example, Boeing has maintained longstanding relationships with Japanese suppliers including Mitsubishi Heavy Industries and Kawasaki Heavy Industries by which these companies have had increasing involvement on successive Boeing jet programs, a process which has helped Boeing achieve almost total dominance of the Japanese market for commercial jets. Outsourcing was extended on the 787 to the extent that Boeings own involvement was reduced to little more than project management, design, assembly and test operation, outsourcing most of the actual manufacturing all around the world. Boeing has since stated that it "outsourced too much" and that future airplane projects [14] will depend far more on Boeing's own engineering and production personnel. Partly because of its origins as a consortium of European companies, Airbus has had fewer opportunities to outsource significant parts of its production beyond its own European plants. However, in 2009 Airbus [15] has opened an assembly plant in Tianjin, China for production of its A320 series airliners. [edit]Competition

through use of technology

Airbus sought to compete with the well-established Boeing in the 1970s through its introduction of advanced technology. For example, the A300 made the most extensive use of composite materials yet seen in an aircraft of that era, and by automating the flight engineer's functions, was the first large commercial jet to have a two-man flight crew. In the 1980s Airbus was the first to introduce digital Fly-bywire controls into an airliner (the A320). Since then Airbus has established itself as a viable competitor to Boeing, both companies use advanced technology to seek performance advantages in their products. For example, the Boeing 787 Dreamliner is the first large airliner to use composites for most of its construction. According to Airbus' John Leahy, [16] the Dreamliner's battery troubles will not cause customers to switch airplane supplier. [edit]Competition

through provision of engine choices

The competitive strength in the market of any airliner is considerably influenced by the choice(s) of engine available. In general, airlines prefer to have a choice of at least two engines from the major manufacturers General Electric, Rolls-Royce and Pratt & Whitney. However engine manufacturers prefer to be single source, and often succeed in striking commercial deals with Boeing and Airbus to achieve their objective. Several notable aircraft have only provided a single engine offering: the Boeing 737300 series onwards (CFM56), the Airbus A340-500 & 600 (Rolls-Royce Trent 500), the Airbus A350 (Rolls-Royce Trent XWB - so far) the Boeing 747-8 (GEnx-2B67), and the Boeing 777[17] 300ER/200LR/F (General Electric GE90).

[edit]Effect

of currency on competition

Boeing's production costs are mostly in United States dollars, wheareas Airbus' production costs are mostly in euros. When the dollar appreciates against the euro the cost of producing a Boeing aircraft rises relatively to the cost of producing an Airbus aircraft, and conversely when the dollar falls relative to the euro it is an advantage for Boeing. There are also possible currency risks and benefits involved in the way aircraft are sold. Boeing typically prices its aircraft only in dollars, while Airbus, although pricing most aircraft sales in dollars, has been known to be more flexible and has priced some aircraft sales in Asia and the Middle East in multiple currencies. Depending on currency fluctuations between the acceptance of the order and the delivery of the aircraft this can result in an extra profit or extra expense - assuming [18] Airbus has not purchased insurance against such fluctuations. [edit]Effect

of competition on product plans

The A320 has been selected by 222 operators (Dec. 2008), among these several low-cost operators, gaining ground against the previously well established 737 in this sector; many full-service airlines also have selected it as a replacement for 727s and aging 737s, such as Star Alliance members United Airlines and Lufthansa; and after 40 years the A380 now challenges the Boeing 747s dominance of the very large aircraft market. The Boeing 747-8 is a stretched and updated version of the venerable 747-400 and will offer greater capacity, fuel efficiency and longer range. Frequent delays to the Airbus A380 program caused several customers to consider cancelling their orders in favour of the refreshed 747[19] 8, although none have done so and some have even placed repeat orders for the A380. However, all A380F orders have been cancelled. To date, Boeing has secured orders for 78 747-8F and 28 747-8I with first deliveries originally scheduled for 2010 and 2011 respectively now, after certification the 747-8F, revised to 2011 and 2012 as the 747-8I is still (as of August 2011) being test-flown, while Airbus has orders for 262 A380s, the first of which entered service in 2007 and has delivered a total of 92 to customers (as of December 2012). Several Boeing projects were pursued and then canceled, like the Sonic Cruiser, launched in 2001. Boeing is now focused on the Boeing 787 Dreamliner as a platform of total fleet rejuvenation, which uses technology from the Sonic Cruiser concept. The 787's rapid sales success and pressure from potential customers forced Airbus to revise the design of its competing A350. Boeing first ruled out producing a re-engined version of its 737 to compete with the A320neo launch in 2016 saying it did not believe airlines would be willing to pay 10% more for only a few percentage gained in fuel efficiency, instead airlines would be looking towards the next major redesign and a 30% fuel saving. The company is facing airline pressure to offer a direct re-engined competitor including from Southwest Airlines who use the 737 for their entire fleet (680 in service or on order) saying they were not prepared to wait 20 years or more for a new 737 model and threatening to convert to Airbus. Industry sources believe that a re-engine of the 737 would be considerably more expensive for Boeing than it was for Airbus A320 due to the 737's design. Boeing eventually bowed to pressure in the summer of 2011 agreeing to supply a large quantity of a new version called the 737 MAX for one customer and the [20] following quarter made the new product available to other customers. [edit]Safety Both aircraft manufacturers have good safety records on recently manufactured aircraft. By convention, both companies tend to avoid safety comparisons when selling their aircraft to airlines. Most aircraft dominating the companies' aircraft sales, such as the Boeing 737-NG and Airbus A320 families (as well

as both companies' wide-body offerings) have good safety records as well. Older model aircraft such as the Boeing 727, the original Boeing 737s and 747s, Airbus A300 and Airbus A310, which were [21] respectively first flown during the 1960s, 1970s, and 1980s, have had higher rates of fatal accidents.
European planemaker Airbus and US rival Boeing have traded stinging barbs over controversial government support for aircraft development, accusing each other of bending the rules. Airbus was first out of the blocks, rejecting claims by its arch-rival that it had caused job losses in the United States, arguing that Boeing itself was responsible for destroying employment. "Boeing repeats its old standby that European reimbursable loans destroyed jobs in America," Airbus said in a statement issued after it unveiled plans Monday to open a factory on Boeing's home turf. "The WTO (World Trade Organization) dismissed such claims and has specifically found that Boeing's own management decisions and its outsourcing/offshoring policy were exclusively responsible for American job losses," it said.
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Boeing responded in kind, charging Airbus with getting six times the government subsidies it had received. WTO findings "were crystal clear," it said. "$3.0 billion of subsidies not already corrected against Boeing versus $18 billion of subsidies against Airbus." It said it would "support whatever steps the US government deems necessary to fulfill its WTO obligations. We expect the same commitment to compliance from Airbus and the European Union. "Yet they have singularly failed to meet the WTO requirement to remove outstanding illegal subsidies or their adverse effects," it said. Worse still, Boeing charged that Airbus was continuing to get similar subsidies for its new wide-bodied A350 plane, aimed to compete directly with its own 787 Dreamline. "Airbus and the EU must take immediate steps to comply with the WTO's ruling to deal with outstanding subsidies and it must finance the A350 and all other future programs on commercial terms," it said. Boeing and Airbus, which dominate the global aircraft business, have been at odds for years over subsidies they receive from their government backers, and both have won and lost complaints filed against the other at the WTO. The European firm said in Monday's statement that "as Boeing persists in misleading the public, Airbus expects another WTO ruling that confirms once again its prior findings." These were, it said, that European government loans were a WTO-compliant private-public partnership mechanism while grants, as received by Boeing, were illegal. Airbus, a subsidiary of the European Aeronautic Defence and Space Company (EADS), called on Boeing to "walk the talk: cut the cheap misinformation and the massive illegal government subsidies". Airbus on Monday said it planned to build a $US600 million assembly plant in the US port city of Mobile, Alabama, on the Gulf of Mexico, to produce the popular A320 passenger planes. The firm, based in Toulouse in southwestern France, said it will roll out its first US-built plane by 2016. Airbus estimates 4600 new single-aisle aircraft will be needed in the United States over the next 20 years and the new US plant could more than double its share of the huge market.

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