Airbus's origins go back to an Anglo-French study into the widebody airliner market in the mid-1960s. The dream became a reality in December 1970 when Airbus Industrie was created as a 50/50 joint venture between France and Germany under French law as a Groupement d'Iterêt Economique, or GIE.
France's newly created aerospace conglomerate Aerospatiale represented the tricolour, while Germany's interests were grouped under "Deutsche Airbus", which comprised MBB and VFW. CASA of Spain became the third partner in Airbus in 1971 when it signed up for a 4.2% stake, laying the foundations for what would become EADS three decades later.
The initial function of the consortium was to market the first Airbus product, the 250-seat A300 twinjet, and the GIE format provided the perfect legal framework to get things running, providing joint liability, fiscal transparency, operational flexibility and no dominant partner.
The GIE ensured that Airbus management was allocated to an individual organisation, without interference from government agencies, although governments were to be called upon to provide development funding for programmes in the form of reimbursable loans.
Despite being involved from the very beginning and having at one stage held a 37.5% lead share, the UK fell at the final hurdle when the government decided in 1969 not to participate as a paid-up partner in Airbus, amid concerns that it would not see an early return on its anticipated £60 million investment. Hawker Siddeley Aviation (HSA) kept the union flag flying within the programme on a subcontract basis as the design centre and supplier for the wing. This left the door ajar for the nation to re-enter the fray in 1979, when the then-recently created British Aerospace (BAe - which brought the country's two largest players, HSA and BAC, together) became a 20% shareholder.
The structure of the Anglo-French Concorde joint venture had provided the framework for Airbus, but there were certain important differences that gave it tighter control of its destiny. Unlike Concorde, assembly lines and marketing efforts were not duplicated.
The US dollar was also adopted from the start for all the consortium's accounts and contracts between partners. Another important part of the original mission statement was to seek sales success (and supply) from non-national markets. This is why, 34 years on, Airbus can boast a 45% share of its US rival's home market in terms of orders placed since 1999. By 2004, about 1,000 Airbuses were flying in the North American market, built with the help of more than 300 US suppliers.
No doubt EADS aims to piggy-back on the success of its daughter company across the Atlantic to boost the market for its other products, such as helicopters and systems, with the ultimate aim of securing customers in the US government.
After a slow start with the A300, which entered service in 1974, sales picked up in the late 1970s as Airbus began to convince the world of the benefits of the twin-engined widebody concept. The A310 "shrink" arrived in 1983 to keep the momentum going, but it was not until the introduction of the fly-by-wire single-aisle family with the A320 in 1988 that the consortium truly put itself on the map. Not only did the addition of a sub-200-seater broaden the product range, but the technology that came with it gave Airbus a lead its rivals have yet to follow.
By the mid-1990s, the first of Airbus's new long-haul family, the A330/A340, were established in service, but the consortium's market share was still hovering around 30% (of the order backlog). Similarly, Airbus's share of the output represented around one-third of total jet airliner production. This may have been seen as a healthy target in the early days of the programme, but was now no longer acceptable.
At that time, two key events took place. First, McDonnell Douglas was purchased by Boeing which, overnight, halved the number of competitors for Airbus and would later create some major headaches for the resultant behemoth. Second, Airbus management recognised that the days of a manufacturer operating as a GIE consortium were numbered, with then-managing director Jean Pierson declaring that the format had reached its "genetic limits".
Although ideal as a platform for launch, the GIE structure was now too restrictive because it lacked transparency for product-by-product profitability and costs, while the principle that all decisions required unanimity among board members was hampering major business moves.
Airbus began a cost-cutting exercise, but efforts to reinvent itself as a so-called single corporate entity (SCE) were in tatters by 1998 amid shareholder disputes over the value of their parts of the business. At the time, there was talk of a merger between BAe and Dasa - parent of the German Airbus partner- and insiders claim the French partner blocked the SCE effort amid concerns that this could erode its position within Airbus.
By 1998 Boeing was having serious difficulties digesting the takeover of McDonnell Douglas and suffering quality problems as it ramped up production, damaging its credibility and handing Airbus an unexpected boost. With current president and chief executive Noel Forgeard now at the helm, the Airbus sales team changed gear and market share rocketed through 40% in 1998 to 50% in 2000 - and it has not looked back since.
Pierson had departed with his much-vaunted reorganisation plan still only a dream, but two factors would quickly put it back on the rails. It was clear that the $11 billion plan to build the world's largest airliner - then known as the A3XX - could not be realised without restructuring. Also, the two state-owned Airbus partners - Aerospatiale and CASA - developed a "private-sector spirit". So Airbus had two objectives for 2000 - to reinvent itself as the Airbus Integrated Company (AIC) and to launch the A3XX.
The AIC efforts were helped by the merger of three of the partners to form EADS, which gave a new impetus to the integration and simplified talks by halving the number of Airbus stakeholders from four to two. The AIC deal was agreed in June 2000 and implemented in early 2001, by which time the A3XX had been launched.
Under its new structure, Airbus is controlled by an integrated multinational management team which is headed by Forgeard and has four divisions - Airbus France, Airbus Deutschland, Airbus Espana and Airbus UK. All programmes, engineering and manufacturing facilities have been integrated - a move designed to generate an "annual value creation" of €450 million from 2004.
What the reorganisation did was formalise the centres of excellence that had been started with the launch of Airbus in 1970, when it was decided that partners would all specialise in particular areas: France - final assembly; Germany (which is the company's biggest division, employing 18,400 people) - fuselage production and cabin furnishing and later single-aisle final assembly; Spain - horizontal stabilisers; and the UK - wing design and manufacture.
Source: Flight International
