New Airbus troubles no surprise

By Theo Leggett
Europe business reporter, BBC News

The A380 is the Airbus flagship

Sad but true - the news of yet more delays to the Airbus A380 comes as little surprise.

In recent weeks there has been widespread speculation that the problems revealed by the company in June were just the tip of the iceberg.

Mike Turner, the chief executive of BAE Systems, poured fuel on the flames by suggesting that he would be surprised it there weren't further delays.

BAE's decision to push ahead with the sale of its 20% stake in Airbus - despite a surprisingly low assessment of the value of its holding - was seen by many as a striking vote of no-confidence.

So how did it come to this?

Just two years ago, Airbus was flying high.

Its rival Boeing was struggling to cope with management scandals and a falling order book.

Meanwhile the European aircraft maker was delivering more planes and taking more orders - including several for the brand new A380.

But once the double-decker giant superjumbo began flying, the problems started to mount up.

Wires crossed?

It is worth remembering that this is a completely new aircraft - designed from scratch and incorporating state-of-the-art technology.

Airbus now admits that it underestimated the length of time it would take to solve the numerous faults that cropped up - especially with the aircraft's highly complex electronics.

Such problems were amplified by varying demands from the airlines for special cabin features, such as wireless internet access and complex entertainment systems.

Yet key managers at Airbus parent company EADS insisted that they were unaware of the unfolding situation - just weeks before last June's announcement that the programme had fallen a year behind schedule.

Tensions

Politics may have played its part.

Airbus confirms A380 delays

Since EADS was created six years ago, there have been tensions between its main shareholders with frequent bickering between the German group Daimlerchrysler on the one hand and the French shareholders, Lagardere and the French state on the other.

The company's structure reflects the need to balance their interests. EADS has two chairmen and two CEOs. In each case one is French and one is German.

At the 2005 Paris Airshow, a row between the two sides even managed to overshadow the public debut of the A380.

At the time, Airbus chief executive, the Frenchman Noel Forgeard, was due to take joint control of EADS.

But his appointment was initially blocked by Daimlerchrysler, because of what it saw as an attempt by the French shareholders to expand their influence in the company.

Many analysts believe the clumsy management structure of EADS and the political bickering between its main shareholders has had an impact on Airbus - and helped to undermine the A380 programme.

Restructuring

So what happens now?

There's no question that Airbus' reputation has been badly damaged, at a time when a resurgent Boeing is seeing its order book fill more quickly than its European rival.

While Airbus has been focusing its resources on the ailing superjumbo, airlines have been queuing up to buy Boeing's latest offering, the super-efficient 787 Dreamliner.

It's a much smaller and cheaper aircraft than the A380, designed for an entirely different market - in which Airbus currently doesn't have much to offer.

Airbus plans to build a heavily redesigned version of its A350 model to compete, but for the moment it's playing catch-up.

Steep challenges

The man charged with cleaning up the mess is Christian Streiff, the new chief executive of Airbus.

He is carrying out a detailed audit of the entire company, and a restructuring plan is expected to follow. He has also replaced the head of the A380 programme.

But steep challenges lie ahead.

The $14bn A380 project is a long way from breaking even, and the company simply cannot afford to see existing customers cancel their orders.

Meanwhile opposition from Washington to government subsidies is making it ever more difficult for Airbus to raise cash for new aircraft programmes.

Perhaps the company should count itself lucky that, where commercial aircraft are concerned, it operates in a market where it has only one competitor.