Airbus - a case against government intervention in corporations?

[Futobingoro]

I have seen many topics on this forum about how the influence of private interests has made a mess in Washington. If the below article is to be believed, Airbus is an example of how government interests can make a mess of a private company (and in a case like this, I use the term "private" loosely).

http://www.chron.com/disp/story.mpl/ap/fn/4652219.html

I don't think the author is entirely unbiased, and I don't agree with his overwhelming pessimism on the outlook of Airbus, but I do think his facts are correct:

-engineers in Germany did not use the same software as their French counterparts, causing a two-year delay in the A380, order cancellations, massive monetary losses, plant closures, workforce cuts and sparking an international blame game

-at one point early in the history of Airbus, French prime minister Lionel Jospin threatened to block the merger of two firms in the consortium unless the French government was allowed to buy a 15 percent stake

-DaimlerChrysler representatives blocked CEO Louis Gallois' proposals, demanding that Germany get a larger workshare on the A350, forcing Gallois to cancel movement of wing work from Germany to Britain (which would have cut costs) and making it up to Britain by retention of British production that would have been moved to cheaper suppliers

-Gallois also caved to German pressure to open a second A320 line in Hamburg, decreasing production efficiency

-the current French presidential race has generated "hands-on" rhetoric from both Royal and Sarkozy, angering DaimlerChrysler, which had sold a stake to France only after the assurance that French politics would not result in strategic decisions

-Noël Forgeard, CEO of Airbus during the wiring problems, was once Jacques Chirac's political advisor; Chirac backed Forgeard during the wiring upheaval

Overall, it seems that no new idea can go forward without consultation with all the national interests (French, British, German and Spanish, among others). According to Jean Pierson, former CEO of Airbus, this proved workable when the company was not centralized, where one partner could not "hold out" for long in a confrontation with the other three. The movement to a single company, however, now necessitates that decisions must balance the needs of the partner countries. Before, a partner stood to lose the most if it confronted the consortium. Today, the whole company loses.

What are your thoughts on the Airbus fiasco? Was it a mistake to tie together the economic, political and nationalist ambitions of four countries?

 

[MeJennifer]

What are your thoughts on the Airbus fiasco?

Fiasco?

It's flying now isn't it?
The biggest commercial plane in the world!

A project of this complexity obviously does not go without big problems.

But for now, kudos to Airbus for reaching the next level in aviation!


These are my thoughts!

 

[Cyrus]

Airjunk...I mean airbus...

Give me an American made Boeing anyday.

I hope airbus goes bust and Boeing wins the day.

 

[MeJennifer]

Give me an American made Boeing anyday.

Jealousy anyone?

 

[Cyrus]

Jealousy anyone?

Actually no. I honestly think that new airjunk looks ugggggglay.

I like the boeing 737 :!) Beautiful airplane.

 

[Anttech]

Fiasco?

It's flying now isn't it?
The biggest commercial plane in the world!

A project of this complexity obviously does not go without big problems.

But for now, kudos to Airbus for reaching the next level in aviation!These are my thoughts!

I would agree, same goes for concord, that also had a rocky road to market, but was an engineering marvel. Same as the channel tunnel between England and France. There are many projects that need the backing of government to succeed. Perhaps a case in point closer to home: The Hoover dam.

If you (OP) think that these problems are only happening in government back projects, then you haven't worked on many large projects.

What are your thoughts on the Airbus fiasco? Was it a mistake to tie together the economic, political and nationalist ambitions of four countries?

Their economic political and national interests completely tied to one another via the EU before airbus, what is your point here?

N.B.
I wonder if this pointless thread will be locked for Euro-bashing

 

[Anttech]

Actually no. I honestly think that new airjunk looks ugggggglay.

I like the boeing 737 :!) Beautiful airplane.

Why does it look ugly? It has 2 wings some wheels, all airplane boxes are ticked

What matters is the engineering marvel behind the A380 which surpasses the 40 year 737 any day.

 

[drankin]

Why does it look ugly? It has 2 wings some wheels, all airplane boxes are ticked :)

What matters is the engineering marvel behind the A380 which surpasses the 40 year 737 any day.

Our plane is better than your plane... :tongue2:

 

[out of whack]

I honestly think that new airjunk looks ugggggglay.

Sort of like a beluga whale forehead, right?

 

[Anttech]

Our plane is better than your plane... :tongue2:

Our plane is bigger than yours :yuck:

 

[Cyrus]

Our plane is bigger than yours :yuck:

Quality, not quantity, my friend. See: B-787

 

[drankin]

Our plane is bigger than yours :yuck:

I see only one way to resolve this...
Evo? Does size really matter?

jk

 

[Anttech]

Quality, not quantity, my friend. See: B-787

Yes I know, it was a joke, but let's be frank you don't know the quality of the A380, and if you have a non-bias think about it, you will admit its an engineering masterpiece

 

[Cyrus]

Yes I know, seriously, but let's be frank you know the quality of the A380 is poor, and if you have a non-bias think about it, you will admit its an engineering of the B-787 is a masterpiece

I agree, the beoing 787 is an engineering marvel. Good luck landing your A-380 on the 2-3 airports in the world that will carry them.

Oh, and BTW, we have the spruce goose. So OURS is STILL bigger, 60 years later. You silly europeans are behind the times. Big went out in the 70's after the 747.

 

[Anttech]

I agree, the beoing 787 is an engineering marvel. Good luck landing your A-380 on the 2-3 airports in the world that will carry them.

Oh, and BTW, we have the spruce goose. So OURS is STILL bigger, 60 years later. You silly europeans are behind the times. Big went out in the 70's after the 747.

Its not mine actually. There are many airports that will carry them, and I was saying the A380 is an engineering masterpiece. I suppose you could design it in your sleep

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[Cyrus]

Its not mine actually. There are many airports that will carry them, and I was saying the A380 is an engineering masterpiece. I suppose you could design it in your sleep

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Sleep, pahlease. In my daydreams. Sleep is for hard stuff.

In all seriousness, how many airports, is "many"?

http://www.airbusjapan.com/pdf/a380/a380airport_compat.pdf

Based on our current work, the early A380 airports are:
l 2006/2007:
• LHR, CDG, LGW, SIN, NRT, SYD, JFK, LAX, SFO, MIA, DXB, DOH

That, is not many airports.

 

[FredGarvin]

I'll chime in a bit...

The A380 is a pretty cool looking aircraft. I was just in NY and saw it land at Kennedy. It looks best, I think, when all of it's flaps and control surfaces are extended when coming in for a landing. It has a graceful gull type wing that really is quite nice.

In terms of the Airbus-government backing, I am completely against it. It goes against every thing I think free enterprise is about. I don't have issues with companies that have both government and civil contracts (my company does) but to have direct backing of a government does not make a level field. From an engineering perspective, the cluster that is a company/consortium like that is a HUGE gaggle of bureaucracy. I am amazed the airplane made it off the ground.

The A380 has some fantastic advances in technology. They hydraulic systems alone are a marvel. Someone finally got the 5000 psi systems to work. Everyone will be doing this in the future. Even military aircraft.

I give props to the Europeans on a great plane. What I don't like is the arm bending and influence that was surely brought to bear by the French government. All we can do now is sit back and see just how many customers they lose due to production issues and then we can decide if it was all really worth it. Remember the Concorde was a business fiasco too.

 

[Anttech]

It 6* more than 2..

Anyway I know that Prestwick airport can handle it, and many many more that you didnt list there, especially ones that have a dual Military function. I think you meant to say that the A380 can only land in certain big international airports.

Anyway its the future of travel. Less fuel, more passengers, less pollution, longer distances. Get with the 00 not the 60's with your 747 nonsence

 

[Cyrus]

It 6* more than 2..

:rofl: Excuse me. *6* airports. I hope a LOT of people need to go only 6 places in the world.:rofl:

The new B-787 is going to make your whale obsolete. Sorry, but I honestly put my money on boeing for this one.

The 737 became the standard for its size, and I can see the 777 and now 787 doing the same.

 

[Anttech]

6* 2 (6 multipled by 2) more!

The new B-787 is going to make your whale obsolete.

The 737 became the standard for its size, and I can see the 777 and now 787 doing the same.

Bit like American cars yeah?

Introducing the all new Boeing Muscle Plane
*Air traffic control, this is US Airlines, are we clear to power slide into gate 3*

Sorry, but I honestly put my money on boeing for this one.

cyrusabdollahi has spoken, quick someone call my broker, I need to put all my money into Boeing shares!

/sarcasm

 

[FredGarvin]

The race between Boeing and Airbus is not a done deal by any means. There is a very important decision to be made here by the powers that be that control the airline businesses. Boeing is taking the safer route IMO by betting that their aircraft, that has very good performance, will be more accepted by airports and customers that don't want to put millions of dollars into required renovations and upgrades. A lot of places may have the runway to land the aircraft, but they don't have the terminal facilities to do so. That is where the lion's share of the upgrade costs are going to be incurred.

Personally, I think Boeing will come out on top on this one, especially in the light of Airbus' troubles. 2 extra years is a long time to have an airline company wait for a plane. The lost customers and penalties they're going to have to pay are really going to take a bite out of their bottom line. I also think Airbus should have pushed the cargo version of the plane harder. Now that Boeing has the LCF, it's going to be a tough sell on the cargo side too. This is a very interesting time for aviation.

 

[Cyrus]

http://youtube.com/watch?v=dVRHFYMjEuI

 

[Futobingoro]

Getting back to my original subject, I will say that there is indeed a substantial difference between the relationships the two companies have with their respective governments.

Most of Boeing's production decisions are based upon practical considerations. Boeing has many production facilities in western Washington, for instance, because of the low electricity prices and access to seaports. In the case of the upcoming 787, the city of Everett seemed like a natural location for production, as all the other widebody Boeings have been manufactured there. This was far from a done deal, however, and the state of Washington had to institute healthy tax incentives in stiff competition against other states to guarantee placement of the assembly line in Everett.

Airbus, on the other hand, seems to have been forced into an opposite decision-making scheme. An assembly line was opened in Hamburg, not for practical purposes, but to balance workshare among partners in the consortium. Additionally, as mentioned in my earlier post, some wing production was retained in Germany instead of moving it to Britain (also due to workshare concerns) and Britain was compensated through retention of production that would have been shifted to more cost-effective subcontractors.

My conclusion is that nationalism is getting in the way of economics both at Airbus headquarters and in the capitals of the consortium countries.

 

[Futobingoro]

As far as the efficiency of the A380 is concerned, it is not as much of an advancement as one might think.

Assuming maximum range at maximum capacity with full fuel tanks:

A380 (source)

Seating: 555 (3-class)
Range, fully loaded: 15,000 km

Fuel capacity: 310,000 L
minus 5% fuel reserves: 294,500 L

1000 * (liters of fuel burned per seat per kilometer) = 35.38

747-400 (source)

Seating: 416 (3-class)
Range, fully loaded: 13,450 km

Fuel capacity: 216,840 L
minus 5% fuel reserves: 205,998 L

1000 * (liters of fuel burned per seat per kilometer) = 36.82

I subtracted 5% fuel reserves from both aircraft to compensate for fuel not burned; results were multiplied by 1000 to aid comparison.

The A380 has about a 4% improvement in fuel burn per seat-kilometer over the 747-400.

Using the advertised technical specs for the 747-8I, the new Boeing will have a 6% improvement in fuel burn per seat-kilometer over the A380. (source)

Perhaps the A380's efficiency will increase with its ability to make fewer flights to carry the same number of passengers as smaller aircraft, but I still feel that some are wrongfully being led to believe that the A380's fuel burn is drastically less than the 747-400 series.

In a related note, an airline could purchase two 787-9 aircraft for not much more than the price of one A380. The two 787-9s would use 263,530 liters¹ of fuel to carry 560 passengers² in a 3-class configuration over a range of 15,750 km³, compared to an A380 using 294,500 liters to carry 555 passengers in a 3-class configuration over 15,000 km (the 787s would burn about 15.5% less fuel per seat-kilometer). The landing fees, which are often computed based on landing weight, could also be lower for the two 787s (376,482 kg⁴ combined maximum landing weight for the two 787s vs 386,000 kg⁵ maximum landing weight for one A380).

I know there are other factors to take into consideration, but this shows that the simple notion of increasing efficiency by moving more people at once often does not play out as expected. In fact, I believe that the A380 is butting up against the scaling laws of physics, whereby doubling the capacity of a transport may more than double its mass. Indeed, a fully-loaded A380, with about twice the capacity of a 787-9 and with roughly the same range, is about 2.3 times the mass of the fully-loaded Boeing aircraft.

¹ source, corrected for 5% fuel reserve)
² http://www.boeing.com/commercial/airports/acaps/787brochure.pdf , page 11
³ source
⁴ http://www.boeing.com/commercial/airports/acaps/787brochure.pdf , page 7
⁵ http://www.airbus.com/en/aircraftfamilies/a380/a380/specifications.html

 

[Anttech]

Most of Boeing's production decisions are based upon practical considerations. Boeing has many production facilities in western Washington, for instance, because of the low electricity prices and access to seaports. In the case of the upcoming 787, the city of Everett seemed like a natural location for production, as all the other widebody Boeings have been manufactured there. This was far from a done deal, however, and the state of Washington had to institute healthy tax incentives in stiff competition against other states to guarantee placement of the assembly line in Everett.

Airbus, on the other hand, seems to have been forced into an opposite decision-making scheme. An assembly line was opened in Hamburg, not for practical purposes, but to balance workshare among partners in the consortium. Additionally, as mentioned in my earlier post, some wing production was retained in Germany instead of moving it to Britain (also due to workshare concerns) and Britain was compensated through retention of production that would have been shifted to more cost-effective subcontractors.

You have compared apple to pears. Knowing nothing about the positiive values of using germany for engineering the craft you have highlighed *your* opinion on the emotional reason behind the airbus' decision & your *practical* reasons behind Boeing's. You do NOT know the pratical reasons behind Boeing or Airbus' decision, so why on Earth are you trying to base an argument on this? It seems weak at best, have a rethink and come back with a balanced argument instead of a veiled attempt at bashing something you don't like.

 

[Futobingoro]

From last month:

http://www.forbes.com/manufacturing/2007/02/28/eads-airbus-update-markets-equity-cx_cn_0228markets29.html?partner=rss

It was predicted that France and Germany would suffer equally. Last week, German Chancellor Angela Merkel and French President Jacques Chirac apparently agreed to share the burden of job cuts and restructuring, saying there should be an equitable distribution of the measures needed to get the company's house in order. Chirac added that any job losses or site closures had to entail compensation.

After this meeting, analysts always believed an equal number of French and German production sites would be shuttered under a restructuring program that was allegedly modified to appease the Germans. German officials apparently agreed to drop their opposition to production of the upcoming A350 plane being based in France in exchange for parity in the number of site closures. Berlin had signaled it would fight tooth and nail to defend German jobs in the event of a restructuring, threatening to cancel government weapons contracts with EADS if it shifted production out of Germany.

Now the final assembly of the A350 will probably be based exclusively in France, instead of being split between Germany and France as programs traditionally have been. In return, a future revamp of the single-aisle A320 plane will be assembled in Germany.

I am highly doubtful that the unprofitable/excess positions were evenly distributed between France and Germany. They may have been, but it would have been a coincidence.

Also, I am struck by the process used to decide on responsibilities for producing the A350 and the successor to the A320. These decisions do not have the appearance of judgments based upon deep analysis of economic data. It seems to me that German and French politicians sat down at a table and traded poker chips: France exchanging future single-aisle jetliner production for A350 assembly, with the German specter of canceled defense contracts looming overhead.

It seems that you think I am opposed to multinational projects as a whole. I am not, I am simply pointing out the difference in how Boeing and Airbus juggle the needs of their multinational teams. Airbus policy seems to be largely dictated by European politics, while Boeing enjoys a greater degree of freedom in running its projects.

The 787 program involves 43 suppliers at 135 sites in over two dozen countries around the world. When was the last time you heard about bickering over the workshare on the 787?

 

[denverdoc]

Personally, I think its pretty cool that they can cut a deal across international lines. Put all that nationalistic counterproductive crap aside, and try to find a sol'n in all intersts. Basically both aircraft are pretty primitive and may be the last gasp in terms of a tube fuselage, upfront wings design.