HISTORY

Formation of Airbus Industrie

Airbus Industrie was formally established as a Groupement d'Interet Économique (Economic Interest Group or GIE) on 18 December 1970.  It had been formed by a government initiative between France, Germany and the UK that originated in 1967. The name "Airbus" was taken from a non-proprietary term used by the airline industry in the 1960s to refer to a commercial aircraft of a certain size and range, for this term was acceptable to the French linguistically. Aérospatiale and Deutsche Airbus each took a 36.5% share of production work, Hawker Siddeley 20% and Fokker-VFW 7%.  Each company would deliver its sections as fully equipped, ready-to-fly items. In October 1971 the Spanish company CASA acquired a 4.2% share of Airbus Industrie, with Aérospatiale and Deutsche Airbus reducing their stakes to 47.9%.  In January 1979 British Aerospace, which had absorbed Hawker Siddeley in 1977, acquired a 20% share of Airbus Industrie.  The majority shareholders reduced their shares to 37.9%, while CASA retained its 4.2%.

Transition to Airbus SAS

The retention of production and engineering assets by the partner companies in effect made Airbus Industrie a sales and marketing company.  This arrangement led to inefficiencies due to the inherent conflicts of interest that the four partner companies faced; they were both GIE shareholders of, and subcontractors to, the consortium. The companies collaborated on development of the Airbus range, but guarded the financial details of their own production activities and sought to maximise the transfer prices of their sub-assemblies.  It was becoming clear that Airbus was no longer a temporary collaboration to produce a single plane as per its original mission statement, it had become a long term brand for the development of further aircraft. By the late 1980s work had begun on a pair of new medium-sized aircraft, the biggest to be produced at this point under the Airbus name, the Airbus A330 and the Airbus A340. 

In the early 1990s the then Airbus CEO Jean Pierson argued that the GIE should be abandoned and Airbus established as a conventional company.  However, the difficulties of integrating and valuing the assets of four companies, as well as legal issues, delayed the initiative. In December 1998, when it was reported that British Aerospace and DASA were close to merging, Aérospatiale paralysed negotiations on the Airbus conversion; the French company feared the combined BAe/DASA, which would own 57.9% of Airbus, would dominate the company and it insisted on a 50/50 split.  However, the issue was resolved in January 1999 when BAe abandoned talks with DASA in favour of merging with Marconi Electronic Systems to become BAE Systems.  Then in 2000 three of the four partner companies (DaimlerChrysler Aerospace, successor to Deutsche Airbus; Aérospatiale-Matra, successor to Sud-Aviation; and CASA) merged to form EADS, simplifying the process. EADS now owned Airbus France, Airbus Deutschland and Airbus España, and thus 80% of Airbus Industrie.  BAE Systems and EADS transferred their production assets to the new company, Airbus SAS, in return for shareholdings in that company.

Expansion and sale of BAE stake

In 2003, Airbus and the Kaskol Group created an Airbus Engineering centre in Russia, which started with 30 engineers and since has emerged as a model of success for Airbus’ globalisation strategy. It was the first engineering facility to open in Europe outside of the company’s home countries. Equipped with state-of-the-art communications equipment and linked with Airbus engineering sites in France and Germany, the facility performs extensive work in disciplines such as fuselage structure, stress, system installation and design. In 2011, the centre employs some 200 engineers who have completed over 30 large-scale projects for the A320, the A330/A340 and the A380 programs. Russian engineers also performed more

than half of all design work on the A330-200F freighter, with its activity related to fuselage structure design, floor grids installation and junctions design. The centre currently is involved in the A320neo Sharklets design development and numerous design works for the A350 XWB programme.

On 6 April 2006 plans were announced that BAE Systems was to sell its 20% share in Airbus, then "conservatively valued" at €3.5 billion (US$4.17 billion).  Analysts suggested the move to make partnerships with U.S. firms more feasible, in both financial and political terms.  BAE originally sought to agree on a price with EADS through an informal process. Due to lengthy negotiations and disagreements over price, BAE exercised its put option which saw investment bank Rothschild appointed to give an independent valuation.

In June 2006 Airbus was embroiled significant international controversy over its announcement of further delays in the delivery of its A380. Following the announcement the value of associated stock plunged by up to 25% in a matter of days, although it soon recovered afterwards. Allegations of insider trading on the part of Noël Forgeard, CEO of EADS, its majority corporate parent, promptly followed. The loss of associated value was of grave concern to BAE, press described a "furious row" between BAE and EADS, with BAE believing the announcement was designed to depress the value of its share.  A French shareholder group filed a class action lawsuit against EADS for failing to inform investors of the financial implications of the A380 delays while airlines awaiting deliveries demanded compensation.  As a result EADS chief Noël Forgeard and Airbus CEO Gustav Humbert announced their resignations on 2 July 2006.

On 2 July 2006 Rothschild valued BAE's stake at £1.9 billion (€2.75 billion), well below the expectation of BAE, analysts, and even EADS.  On 5 July BAE appointed independent auditors to investigate how the value of its share of Airbus had fallen from the original estimates to the Rothschild valuation; however in September 2006 BAE agreed the sale of its stake in Airbus to EADS for £1.87 billion (€2.75 billion, $3.53 billion), pending BAE shareholder approval.  On 4 October shareholders voted in favour of the sale, leaving Airbus entirely owned by EADS.

2007 restructuring

On 9 October 2006 Christian Streiff, Humbert's successor, resigned due to differences with parent company EADS over the amount of independence he would be granted in implementing his reorganisation plan for Airbus.  He was succeeded by EADS co-CEO Louis Gallois, bringing Airbus under more direct control of its parent company.

On 28 February 2007, CEO Louis Gallois announced the company's restructuring plans. Entitled Power⁸, the plan would see 10,000 jobs cut over four years; 4,300 in France, 3,700 in Germany, 1,600 in the UK and 400 in Spain. 5,000 of the 10,000 would be at sub contractors. Plants at Saint Nazaire, Varel and Laupheim face sell off or closure, while Meaulte, Nordenham and Filton are "open to investors".  As of 16 September 2008 the Laupheim plant has been sold to a Thales-Diehl consortium to form Diehl Aerospace and while the design activities at Filton have been retained, the manufacturing operations have been sold to GKN of the United Kingdom.  The announcements resulted in Airbus unions in France and Germany threatening strike action.

Competition with Boeing

Airbus is in tight competition with Boeing every year for aircraft orders. Though both manufacturers have a broad product range in various segments from single-aisle to wide-body, their aircraft do not always compete head-to-head. Instead they respond with models slightly smaller or bigger than the other in order to plug any holes in demand and achieve a better edge. The A380, for example, is designed to be larger than the 747. The A350XWB competes with the high end of the 787 and the low end of the 777. The A320 is bigger than the 737-700 but smaller than the 737–800. The A321 is bigger than the 737–900 but smaller than the previous 757-200. Airlines see this as a benefit since they get a more complete product range from 100 seats to 500 seats than if both companies offered identical aircraft.

In recent years the Boeing 777 has outsold its Airbus counterparts, which include the A340 family as well as the A330-300. The smaller A330-200 competes with the 767, outselling its Boeing counterpart in recent years. The A380 is anticipated to further reduce sales of the Boeing 747, gaining Airbus a share of the market in very large aircraft, though frequent delays in the A380 programme have caused several customers to consider the refreshed 747–8.  Airbus has also proposed the A350 XWB to compete with the fast-selling Boeing 787 Dreamliner, after being under great pressure from airlines to produce a competing model.

There are around 5,102 Airbus aircraft in service, with Airbus managing to win over 50 per cent of aircraft orders in recent years. Airbus products are still outnumbered 3 to 1 by in-service Boeings (there are over 4,500 Boeing 737s alone in service). This however is indicative of historical success – Airbus made a late entry into the modern jet airliner market (1972 vs. 1958 for Boeing).

Airbus won a greater share of orders in 2003 and 2004. In 2005, Airbus achieved 1111 (1055 net) orders, compared to 1029 (net of 1002) for the same year at rival Boeing.  However, Boeing won 55% of 2005 orders proportioned by value; and in the following year Boeing won more orders by both measures. Airbus in 2006 achieved its second best year ever in its entire 35 year history in terms of the number of orders it received, 824, second only to the previous year. In August 2010, Airbus announced that it was increasing production of A320 airliners, to reach 40 per month by 2012, at a time when Boeing is increasing monthly 737 production from 31.5 to 35 per month.

Boeing has continually protested over "launch aid" and other forms of government aid to Airbus, while Airbus has argued that Boeing receives illegal subsidies through military and research contracts and tax breaks.

In July 2004 former Boeing CEO Harry Stonecipher accused Airbus of abusing a 1992 bilateral EU-US agreement providing for disciplines for large civil aircraft support from governments. Airbus is given reimbursable launch investment (RLI), called "launch aid" by the US, from European governments with the money being paid back with interest plus indefinite royalties, but only if the aircraft is a commercial success.  Airbus contends that this system is fully compliant with the 1992 agreement and WTO rules. The agreement allows up to 33 per cent of the programme cost to be met through government loans which are to be fully repaid within 17 years with interest and royalties. These loans are held at a minimum interest rate equal to the cost of government borrowing plus 0.25%, which would be below market rates available to Airbus without government support.  Airbus claims that since the signature of the EU-US agreement in 1992, it has repaid European governments more than U.S.$6.7 billion and that this is 40% more than it has received.

Airbus argues that the military contracts awarded to Boeing, the second largest U.S. defence contractor, are in effect a form of subsidy, such as the controversy surrounding the Boeing KC-767 military contracting arrangements. The significant U.S. government support of technology development via NASA also provides significant support to Boeing, as do the large tax breaks offered to Boeing, which some people claim are in violation of the 1992 agreement and WTO rules. In its recent products such as the 787, Boeing has also been offered direct financial support from local and state governments.

In January 2005 the European Union and United States trade representatives, Peter Mandelson and Robert Zoellick respectively, agreed to talks aimed at resolving the increasing tensions.  These talks were not successful with the dispute becoming more acrimonious rather than approaching a settlement.

WTO ruled in August 2010 and in May 2011 that Airbus had received improper government subsidies through loans with below market rates from several European countries.  In a separate ruling in February 2011, WTO found that Boeing had received local and federal aid in violation of WTO rules.

Source: Wikipedia