Airbus Group CEO : “For the next decade we do not foresee the need to introduce an all-new program”

Tom Enders2






June 10, 2015. Airbus Group CEO Tom Enders provided an outlook on the company’s businesses during a meeting in Toulouse with AW&ST Managing Editor Jens Flottau and Paris Bureau Chief Amy Svitak (Aviationweek).

AW&ST: What are your expectations for commercial orders at the Paris Air Show?

Enders: I expect no new record this year, but never underestimate [chief salesman] John Leahy. These air shows are sportive contests in a way. We are trying to finalize orders, but it still wide open. At this point there is a lot of negotiating, as usual. I’m quite confident we will again receive orders for more aircraft than we produce. So the market is in pretty good shape.

Should we assume that you will not launch the A380neo in Paris?

We will definitely not launch a new A380 version in Paris. That is a board of directors’ decision and is a long way off. The A380 is not selling as well as it could, and it is no secret we have ongoing discussions on how to enhance its attractiveness. But the A380neo slug wrongly suggests we are only thinking about new engines. Engines make a huge difference, but that is one of many options we are seriously studying.

Late last year, Airbus Commercial CEO Fabrice Bregier said the A380neo would come, while Airbus CFO Harald Wilhelm raised the option of discontinuing the A380 altogether.

Both gentlemen went a little bit off scale during that investor conference, even though there was no disagreement in substance. Management is dedicated to find a good future for the A380. We have invested so much into it over 15 years and feedback is extremely positive from the ultimate customer—passengers—and most of the airlines. I am quite confident the A380 will be in production for many years to come.

How does the recent strengthening of the U.S. dollar change Airbus’s strategy?

Our “Power 8” restructuring program was based on an exchange rate of €1.35 [to $1]. We are now somewhere around €1.10, but nobody knows where the dollar will go. Only a few weeks ago, so-called experts said it would be near parity. The same people now say it will be at €1.20. But the ratio is now in a very comfortable range. Clearly, below €1.35 we are making more money.

So the dollar’s strengthening is not enough to make you change your mind about investing in dollar economies?

To do what? Tear Mobile down? The primary reason for setting up a final assembly line in Mobile [Alabama] was never the dollar. We wanted to be in the U.S. because it is the largest aeronautical market in the world and we want to increase our market share there. Yes, maybe China will surpass the U.S. one day, but even in 20-30 years the U.S. will still be the second-largest aerospace and defense market in the world. Dollar fluctuations do not drive our global industrial strategy.

In China you have been negotiating the creation of an A330 completion center that was linked to a large order. This has not happened. Where do things stand?

It is still linked to the A330 order and we are making progress. China has been and will remain a large market for A330s.

What would be Airbus’s next big project? An A320neo replacement? Something a bit bigger?

For many years this company had too many development projects at the same time. Profitability was suffering and we were lacking resources. For the next decade or so, we do not foresee the need to introduce an all-new program. The A320neo and A321neo are very competitive products, with further incremental improvements possible. There is nothing wrong with the fuselage. Who cares whether it is metal or carbon fiber? Yes, carbon fiber has its advantages, but it is not a panacea. For the A350-900, the challenge is to ramp up. The foundations for 2016-17 have to be laid this year. Then comes the A350-1000, which is progressing well. For the A330 we have a clear path forward. The main issue is how to bridge the gap between old and new. That is more challenging than with the A320neo because of a very different competitive environment.

The Ukraine crisis seems to have changed the outlook for defense spending throughout Europe. To what extent will the industry benefit?

It is stabilizing [defense] budgets. They are no longer shrinking, but whether they will go up again remains to be seen. European governments are still far from reaching their target of spending 2% of GDP on defense. And we can safely say Europe will never get there if the Germans hover around the 1.2% where they are today.

In light of Dassault Aviation’s recent export sales of the Rafale combat jet, has your thinking changed in terms of the future of the Eurofighter Typhoonproduction line?

Everybody is now writing about Dassault, and how they could be so successful in only 2-3 months with the Rafale. This is impressive, no doubt. But in terms of the numbers of export orders, the Typhoon and the Rafale are basically even. And in terms of overall production numbers, the Typhoon is hundreds of aircraft ahead.

But the market for Typhoon has narrowed, and the aircraft lacks some key capabilities.

The Eurofighter is a great aircraft, but we have been struggling to get the capabilities inserted into the system as quickly as the competition has done. That was, in part, due to a much lengthier decision-making process as a result of having to deal with three companies and four governments. It is easy to take decisions if you are one company and one government. We will get the E-Scan radar and air-to-ground strike capability, but this is still ahead of us, whereas some of our competitors already have these capabilities.

Do you see the production line remaining open?

I am confident we’re going to get additional orders, and winning export orders would keep the final assembly lines open a few more years. And if production comes to a close, Eurofighter will still be good business for many years to come. Remember, product support traditionally is more profitable than building the fighters.

On helicopters, are you seeing a softer commercial market than anticipated?

Yes, but we are optimistic. Hence we are in the midst of re-capitalizing our product portfolio, particularly with the H175, which is very well accepted by the market, and the new H160, which will fly probably very soon. And we continue updating other programs, such as the H145 and the H135. At some point, we probably have to renew the Super Puma, which had a nice comeback after the accidents and rotor-shaft problems of 2012-13. Studies of various scenarios and concepts are underway.

Are you counting on military helicopter sales to offset the soft commercial market?

We are winning big contracts. Poland was very important, and I am confident there is more to come this year.

How will this play out in terms of production?

We’re improving our cost structure and looking into lower-cost production sites.

Tom Enders


Airbus had a record showing in space last year.

We are doing so well that I recently joked with [Airbus Defense and Space CEO] François Auque that if he hadn’t been so conservative in his assumptions when we merged our defense and space businesses the division would now be called Airbus Space and Defense. We did not expect space to do so well, particularly on the satellite side.

It’s not just satellites. You are also seeing new investment in launchers, notably with Safran seeking a 50/50 partnership in the new Airbus Safran Launchers venture. They are investing €800 million to achieve that, which came as a surprise.

I was surprised as well. My original proposal was to buy the Safran part. It would have been easier to have a launcher company that is 100% Airbus-owned; a joint venture is a second-best solution. But since this was the only option, we are happily proceeding.

Airbus is one of several contractors competing to build OneWeb’s massive constellation of low-cost Internet communications satellites.

We can make an attractive proposition. We build hundreds of airplanes every year. Why wouldn’t we be able to also build hundreds of satellites? It is a very exciting project. I’m looking forward to OneWeb’s decision.

OneWeb also wants to set up a satellite production facility in the U.S.

No problem. It would allow us to increase our industrial footprint in the U.S.

France has complained that a design flaw in the A400M means it cannot refuel helicopters—a contractual requirement. Can this be resolved?

The French are the only ones who have a requirement for helicopter refueling. We have not solved it, and I’m not sure we’re going to. There are certain physical boundaries, for instance if your rotors come too close to the structure, or if your hoses are too long they become unstable. We’re doing our utmost, but there may be limits.

In February you projected delivery of twice as many A400Ms this year—a total of 16. Has this changed?

Before the [May 9] accident in Seville, Spain, we were on track. Now we need to wait for the results of the investigation by the Spanish authorities and then gauge the consequences for our development and delivery plans. If we can resume the test program and if we can resume delivery of customer aircraft soon, that plan might still be implementable.

What is the biggest challenge in ramping up production of A400M?

If we forget about the accident for a moment, I see two big challenges: First, to stabilize production, reduce the outstanding work in the final assembly line and bring the learning curve and production cost down. Second, we need to get the most critical military functionalities like aerial delivery and Defensive Aid Sub-Systems cleared and production ready as soon as possible. We are still not where we need to be for a stable delivery process, but the situation has much improved.

What are some of  your long-term goals?

Digitalization and smart tools could drive the integration of Airbus much farther. We recently decided we need one collaboration platform for the entire group. All our 140,000 employees can access and use it, collaborate and support each other, without any organizational or hierarchical boundaries. That is pretty cool, as our younger people say. Another big challenge is internationalization. We have come a long way in the past 10 years. But I believe we must go much further in increasing our industrial presence outside Europe and in accessing talent pools worldwide.


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