While the proverbial fly on the wall would doubtless encounter many colourful conversations at next week's Paris air show, one exchange almost certain to raise a few eyebrows is likely to be heard at a meeting of trade ministers from the four Airbus nations scheduled for 14 June, when the thorny question of progress towards transforming the company into a single corporate entity (SCE) is certain to be raised.
At last year's Farnborough air show, an earlier ministerial meeting spawned a commitment to make "urgent progress" towards the established of an SCE. Since then, much water has passed under the bridge. Ministerial faces in Germany and the UK have changed. Yet in one crucial sense, nothing has changed: the reconstitution of Airbus has not moved forwards a single step.
Having described the manufacturer's transformation into an SCE as "a prerequisite for commercial advance" after their Farnborough meeting, the ministers are aware of the issue's importance. The question is, will they attempt to intervene and unlock the current log-jam?
While the success of Airbus in securing an ever-increasing share of aircraft orders over the last few years has been undeniably impressive, the company may be fast approaching a make or break stage in its history. Boeing has been on the ropes since its production lines problems emerged in mid-1997, yet the giant is only sleeping and the recent belt-tightening introduced by new finance chief Debby Hopkins is threatening to bring it roaring out of its slumber.
Meanwhile, Airbus trundles on under an archaic central structure which could leave it perilously exposed to the challenge of a leaner, meaner Boeing. That structure is based on a French legal sleight of hand, the Groupement d'Interet Economique (GIE), which - while usefully side-stepping difficult issues of ownership in a Europe still decades away from the single market when it was formed in 1970 - is in no way equal to the challenges of the C21st.
In the early years of Airbus, when the focus was on R&D and programme launches, the GIE structure was not a major obstacle. But today, with cost-savings at the top of the Airbus agenda, the limitations it imposes are readily apparent. The European company cannot go on competing with Boeing simply by undercutting; it must ultimately seek to win orders by producing aircraft more cheaply, and to do that the establishment of an SCE is vital, bringing significant economies of scale.
It is also also hard to see Airbus going ahead with the launch of such major projects as the A3XX under the current GIE structure, and not only because of the cost issue. To launch a make-or-break project of such scale, the manufacturer needs to be in control of its own destiny. The SCE transformation was due to happen earlier this year, but it seems unlikely even before the end of 2000. The latest sticking point concerns the valuation of the partner companies' interests, which has been complicated by Aerospatiale's takeover of Lagardère's Matra division. The valuation process must therefore begin again.
Further complications concern whether or not the SCE can be established in the absence of a single European Aerospace and Defence Company (EADC). Such a company seems a remote hope following the spate of national consolidation in the UK and France, yet British Aerospace and others insist that an SCE will be more viable - and less exposed to market shocks - under the umbrella of a diverse EADC.
The current wrangling over the share of work and investment for the new A318 also points up the need for Airbus to become a single business. Disagreement spilled over publicly after Airbus chief Noel Forgeard took the step of launching the new project before the process of supervisory board approval had been completed. Emotions always run high in Europe when the subject of prestigious final assembly is discussed, and fear must be that the issue of A3XX assembly will prove most divisive of all.
Clearly, if Airbus is to realise its full potential, its four partners need to grow up fast. Next week's ministerial meeting provides an opportunity for something more than the usual talking shop. It is a gathering at which heads badly need to be banged together.
Source: Flight International
