Turbulent times troubling Airbus

By Theo Leggett
Europe business reporter, BBC News

The A380 is the Airbus flagship

A little over a year ago, the future looked bright for the European aircraft maker Airbus as its long-awaited flagship, the A380 superjumbo, finally took to the skies.

When it made its first appearance in Britain earlier this year, the chancellor Gordon Brown spoke in glowing terms about the international nature of the project.

"This is a triumph of European cooperation and of British science - a passenger plane that will regularly carry more passengers than ever before," he said.

"It will become one of the most popular planes ever produced and we should salute a Europe-wide project involving 20 countries that is going to go from strength to strength."

Now that image of European unity has been rudely shattered, while the future for Airbus itself appears far less rosy.

So where did it all go wrong?

'Very concerned'

Firstly, Airbus announced last week that production problems meant customers would have to wait longer than expected for their new aircraft.

This was because the company had been trying too hard to meet wide-ranging demands from its customers, according to analyst Kieran Daly of Air Transport Intelligence.

"Airbus and indeed Boeing have been very concerned about this issue for a long time now," Mr Daly says.

"They've been warning the airlines, but the airlines tend to take the view that if they're going to buy the aircraft then it needs to be exactly what they think they can achieve for their passengers.

"In the end Airbus wants to please the airlines as best it can and maybe they were too indulgent early on. Now they're really wrestling with it."

Investigation

Shares in the European aerospace giant EADS, which owns 80% of Airbus, plummeted, as airlines threatened to seek compensation or even to cancel their Airbus orders on news of the delays.

Then it got worse - as it emerged that one of EADS' two chief executives, Frenchman Noel Forgeard had sold 2.5m euros worth of EADS shares just weeks before the production delays were made public.

Members of his family, other EADS directors, and major investors also sold large numbers of shares. Now French stock market regulators have launched an investigation.

Mr Forgeard is a former adviser to the French president, Jacques Chirac, and a close associate of prime minister Dominique de Villepin.

Relations soured

The affair has created a political storm, which political analyst Dominique Moisi described as "the cost of the dangerous marriage between industry and politics at the level of the elite".

Mr de Villepin was put on the spot in the French parliament this week by the opposition leader, Francois Hollande who suggested that the government was prepared to turn a blind eye to the misbehaviour of corporate leaders.

The prime minister was furious, accusing Mr Hollande of "cowardice" before being forced to apologise for his outburst.

It has also soured relations between France and Germany, because Mr Forgeard had originally been appointed against the wishes of EADS' German shareholder, DaimlerChrysler.

Over-optimistic

Insiders say the affair has caused a great deal of anger and frustration at the British aerospace contractor BAE Systems as well.

BAE owns 20% of Airbus. It wants to sell that stake to raise money for big investments in the lucrative North American defence industry.

But the problems at the aircraft maker and its parent company have significantly reduced the price the British firm can demand.

The Airbus A380 was meant to be a flagship of European cooperation and engineering excellence.

But a combination of over-optimistic schedules, political interference from a French government determined to present Airbus as a national champion, and the friction between its main shareholders in France and Germany, have left that flagship looking more than a little storm-damaged.