By Howard Wheeldon
A DOW JONES NEWSWIRES COLUMN
LONDON (Dow Jones)--Three months into the job of being Airbus CEO, and you have to wonder whether Christian Streiff now has regrets about the huge task he has taken on.
Delays to the A380 superjumbo are likely to be confirmed at an additional ten months, according to Emirates Airlines which is the largest buyer of the plane so far.
Costs continue to mount while orders remain stubbornly stuck on 159 aircraft.
Streiff is battling to get to grips with a project review that may be telling him that the A380, engineering marvel that it is, may never make a penny of profit for Airbus.
At the very least, it's going to be a rope around the company's financial neck for years yet to come.
To rub salt into the wound, Emirates Airlines CEO Tim Clark was frank Tuesday. He's put his finger on the aircraft-maker's problem in saying "Airbus has deep rooted structural problems, both organizationally and at the shopfloor level."
Clark's also right to say Airbus needs a strong leader without the political interference that has plagued the company and parent EADS from day one.
Such remarks should be as much a wake-up call to EADS' French and German senior management - hardly the first - as they should be inside Airbus. Despite its engineering prowess, Airbus has lost its way because it believed its success was unstoppable.
Talk and marketing hype always come cheap, but Airbus took its eye off the ball in forgetting there are always engineering, technical and financial difficulties in moving from development to production. The A380 was always an ambitious project, but Airbus rushed it.
Emirates' Clark says solving the problem could mean knocking the organization down and designing new working practices from scratch.
Maybe. That would take years to put into action as would any plan to move production to a dollar zone, to hedge Airbus's currency exposure, or other lower-cost production sites.
Going back to the drawing board would create additional customer fears about Airbus deliveries. It might also demoralize the French, German, Spanish and U.K. workforce that has done everything management has asked of it.
And you suspect that, however much they grumble, neither Emirates or Lufthansa, which faces a twelve-month delay, are likely to pull out of the A380. That might not be the case for Virgin Airlines which may be questioning its A380 strategy.
Meanwhile, Airbus' other problems are stacking up. Until it has a restructuring plan in place, it's hard to see how it's going to give the green light to the A350XWX, after it botched the original A350 project, let alone have the plane in the air by 2012.
Though the overall order book remains strong, sales of Airbus' flagship A340 are drying up, leaving only the single-aisle A320 aircraft family and the A330 selling well. The A380 debacle might rub off on overall sales too.
Of course, removing the political meddling that has interfered with EADS and Airbus policy would do a lot to enhance the credibility of both companies.
And it might help EADS' investors, sick and tired of not being told the truth, retain their optimism that given time Airbus will catch up again with a runaway Boeing.
(Howard Wheeldon was a senior equities analyst for 20 years, and has been a columnist at Dow Jones for the past four years. He can be reached at +44 207-842-9251 or by e-mail: [email protected])
(END) Dow Jones Newswires
October 04, 2006 01:45 ET (05:45 GMT)
Copyright (c) 2006 Dow Jones & Company, Inc.
