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Airbus - Celebrates 50 years

Fifty years ago, at the 1969 Paris Air Show, Airbus launched itself with the Airbus A300. In the intervening 50 years the company has grown into a massive airframe, defence and space conglomerate. The A300 turned the airline industry on its head. But it took a while.

 

 

 

The A300 was the first European twin-aisle twin-engine jet for medium-haul air travel. What is arguably far more significant was that Airbus managed to integrate production of aircraft across European nations and deliver a world class product that matches or exceeds the giant Boeing in sales.

But the pan-European conglomerate had a shaky start. In early 1969, in the light of the financial disaster that was Concorde, the Labour party British government under Harold Wilson pulled out from its commitment to support a European twin-aisle airliner. After the many failures of aircraft launched by national industries , the French and Germans had agreed to support a pan-European airliner programme. But without British involvement, the proposed Airbus A300 was engineless.

AW&ST reports that the engine issue was resolved with the help of General Electric’s CF6 replacing the proposed Rolls-Royce RB207. However, the A300 still had no wings supplier. It looked as though the fractured European governments were going to lose their big chance to revolutionise the airline industry.

Fortunately, sanity and the spirit of cooperation prevailed. Fifty years later, Airbus is nearing its 20,000th aircraft order and 12,000th delivery, and it is firmly entrenched in a comfortable, if competitive, duopoly with Boeing. The company is the leader in the high-volume single-aisle market and , with the current Boeing Max problems, looks likely to remain so for some time.

In the widebody market, the A330 and A350 have been big sellers. And while the A380 was a financial failure, Airbus is more than big enough to shrug off the blow. After all, most of its former competitors have disappeared, and new entrants to the market are a long way from being a real threat.

Each year Airbus invites selected journalists from around the world to Toulouse for a briefing on the corporation’s R&D capabilities. It is this massive investment in pioneering new systems such as fly-by-wire that has enabled Airbus to become the market leader.

Just some of the many Airbus innovations include fly-by-wire technology, flight-envelope protection, new materials and the so-called forward-facing crew cockpit (FFCC), which eliminated the flight engineer.

But it took a long time for Airbus to reach the top. AW&ST reports that airlines such as Air France initially balked at Airbus products, and Lufthansa chief Herbert Culmann famously proclaimed: “If someone wants to force me to buy this Airbus, I will take my hat and leave tomorrow.” Demand was so weak that production was down to one aircraft a month when Airbus finally broke into the U.S. market in 1977 by giving struggling Eastern Air Lines free use of four A300B4s for half a year. Even then, Boeing’s “exclusivity” agreements with American Airlines, Delta Air Lines and Continental Airlines kept Airbus effectively locked out of a large potential market.

It took nearly twenty years before Airbus delivered 100 airliners in a single year and it did not catch Boeing in market share until the end of the 1990s, three decades after French and German officials signed the “Airbus pact” at the 1969 Paris Air Show.

Today, Airbus still faces major challenges. Despite structural reforms under recently retired CEO Tom Enders that reduced government interference and put more focus on the bottom line, critics say the company is still too bureaucratic. French and British authorities are investigating allegations of bribery and corruption. And its profitability lags Boeing’s by a sizable measure.

Antoine Gelain, of Paragon European Partners, estimated in a recent column for Aviation Week that the A320 single-aisle family accounts for half of the company’s revenues and at least two-thirds of its profits. “Beyond that, the A350 production forecasts keep being revised downward, the A330 is at a standstill, the A380 has just been cancelled, and the A400M military transport is a financial chasm,” Gelain says.

Airbus’ creation and its longevity were made possible by three factors: politics, people and technology. Without the political backing in France and Germany, the A300 would not have taken off. Without the vision and skills of founders Bernard Ziegler, Roger Beteille and Felix Kracht, it would not have been developed. Without the persuasiveness of Jean Pierson, John Leahy and others, it would not have sold enough products to gain a foothold in the market. And without industrial strategists such as Jean-Luc Lagardere, Manfred Bischoff and later Tom Enders, Airbus would not have become the integrated, globally focused company that it is today.

 

In the Beginning

AW&ST reports that on 6 October 1968 Ziegler hosted Beteille at his home on Avenue Stephane Mallarme in Paris. Their joint project was in crisis, and the two were keen to save it. In May of that year Rolls-Royce had come up with a price tag for the proposed RB207 engine that was to power the original A300. “The difference in price of the RB211 for the Lockheed L-1011 was simply unacceptable, and we realised that Rolls was playing another game without admitting it,” Beteille said at the time. “By continuing in that way, we would have ended up with nothing more than a superb glider.”

Beteille and Ziegler decided to take the risk and propose a major change in the A300 layout. If the aircraft was no longer targeting the 300-seat short-haul market but was shrunk to an 80% scaled version of its former self, Airbus would not only have to spend much less on development, it also would suddenly have engine choice: The RB211 was big enough and so would be the CF6.

Sure enough, soon after the meeting, talks began with GE’s engine division—including its then-CEO of German origin, Gerhard Neumann—and the CF6 became the A300’s first engine. Only much later was the Pratt & Whitney JT9D added. Rolls-Royce never supplied an engine for the first- and second-generation (A310) of Airbus aircraft.

On 29 May 1969 the French and German governments agreed on a memorandum of understanding at the Paris show to jointly develop the A300B. At the time, it was not a momentous event: The Airbus project was a reality.

Following the engine sourcing, the quandary over the A300’s wings nearly killed the development programme. While UK-based Hawker Siddeley was willing to take on the wing work, the Labour British government refused to provide development money. The German government came to the rescue by agreeing to fund the work, removing one of the last major hurdles to programme launch.

The Three Visionaries

Political influence on Airbus management was long considered an albatross, because until 2007, the company was led by two co-CEOs—one French, one German—to ensure that each nation’s interests were protected. But in the beginning, political support for financing was crucial.

A controversial German politician, Franz Josef Strauss, played a crucial role. Strauss, who was later elected leader of the Bavarian conservative party CSU, defence minister and prime minister of Bavaria, was an aviation enthusiast and private pilot. He became the first chairman of the Airbus Industrie supervisory board in 1970 and stayed in that role until his death in 1988, helping ensure that Airbus survived difficult times.

Ziegler was named as the first CEO of the Airbus Industrie consortium, Beteille became chief operating officer, and Felix Kracht, who had played an important role in the background, headed production. German-born Kracht seemed like the ideal person for the job. An engineer and pilot, in 1937 he became the first person to cross the Alps in a self-constructed glider. Later, he pioneered inventions like the airborne coupling of aircraft to allow refuelling. He also worked on the DFS 228, a high-altitude reconnaissance aircraft. Starting in 1959, he served as the representative of France’s Nord Aviation at German aircraft manufacturer Weser Flugzeugbau and played a leading role in developing the Franco-German Transall C-160.

In 1967, Kracht became managing director of Deutsche Airbus, which was to consolidate Germany’s workshare in the upcoming programme. Along with Beteille and Ziegler, he was the mastermind behind the A300B, a technically ambitious aircraft. He pushed to use the best technology available, wherever it came from.  “If the Chinese have the best engine, we will use it,” he said. Beteille, Ziegler and Kracht also agreed that Airbus would not succeed in the long term with only a single product. The A300B would have to be developed into a family of aircraft if the Europeans were to compete with Boeing, McDonnell Douglas and Lockheed. To say so publicly early on did not seem prudent politically, so they initially kept the idea to themselves.

 

Market Entry

Following a nearly flawless flight-test campaign, the A300B was certified in 1974. Yet demand remained poor: Airbus had collected orders for just 30 aircraft but had committed to producing 52 at a rate of 2.5 per month.

The consortium finally convinced Air France to buy the airliner by offering a B2 version with three more seat rows. Even with the A300B2 in commercial service, though, the European venture’s future was still uncertain.

Then came a day in May 1977 that would be a crucial turning point. On that day, Ziegler’s successor, Bernard Lathiere, shook hands on a deal with Eastern Air Lines Chief Executive Frank Borman, and Thai Airways International signed up for A300s. Under the Eastern deal, the airline would get four A300B4s free of charge for six months. The American carrier could not afford a real order—it had lost money over the past 10 years—but Airbus desperately needed a customer in the U.S. Production was down to one aircraft per month.

The experiment was a big success. Eastern ordered 23 A300B4s in April 1978. The agreement between two rather desperate companies—Eastern eventually filed for bankruptcy in 1989 and ceased flying in 1991—was Airbus’s breakthrough in the U.S.

 

The Family Grows

Kracht’s and Beteille’s vision of a family of Airbus aircraft also became a reality. AWS&T points out that studies of various aircraft, such as A300B derivatives, both short-haul and long-haul models, had been discussed for years. Some plans assumed cooperation with other manufacturers including, at some point McDonnell Douglas. Ultimately, it became clear that Airbus had to go it alone.

The A310, initially designated the A300B10, became the first derivative. In 1978, Lufthansa and Swissair were launch customers for the aircraft, which featured a shortened fuselage and new wings and engines. But the big breakthrough was that the aircraft had a two-crew cockpit. This caused discord with the Air France pilot unions, which wanted to stick to three in the cockpit. The A310 derivative flew for the first time in 1982.

Not only was the A310 the first substantially different Airbus aircraft after the A300, the programme also marked the return of the UK aerospace industry to the partnership. British Aerospace took a 20% stake in the programme that it would keep for 27 years.

There were other types in the making: a single-aisle aircraft that ultimately became the A320, and the TA9 and TA11 projects, today known as the A330 and A340. It was long debated which one should have priority.

Just two years after the A310’s first flight, Airbus launched the A320 narrowbody in 1984. It entered service in 1988 and has become the backbone of the manufacturer’s success and its profit driver. The same year the A320 was launched, the last of Airbus’s founding managers departed. A strong new leader had to be found.

 

 

Head to head against Boeing

Jean Pierson, 44 years old and head of Aerospatiale’s aircraft division, was picked to head the second generation of Airbus leadership. Pierson had no political background, but he brought solid industrial experience and a clear vision. Within six months of being appointed, he submitted his view of Airbus’ future to the supervisory board. “We intend to remain the leaders in the widebody market for medium-/long-range aircraft, and we also want to enter the market for very-long-range, widebody 250-seaters,” he stated. “We want to be present in both of the markets by the early 1990s.”

The A340 first flew in 1991; the A330 a year later. The two aircraft were designed to be as similar as possible, aside from the number and types of engines. To ease pilot transition, they also were developed to be as similar to the A320 as possible.

Pierson wanted Airbus to control 30% of the world market for large commercial aircraft, up from the 17% in 1984. For his vision to become reality, he made a daring move: Traditionally, the sales director had been British, in keeping with the tradition of splitting senior management duties between shareholder nations. But Pierson picked an American, John Leahy, a brash New Yorker who had turned around Airbus’ North American sales organization after joining the company in 1985 and landed a breakthrough order from Northwest Airlines for 100 A320s.

“The culture [in Toulouse] was already changing, but not by much,” Leahy recalled in a 2018 interview with AW&ST. “It was still a lot of ‘We know how to sell airplanes. Air France will buy, Lufthansa will buy, British Airways will not buy,’ and so on. We really had to learn how to become an international sales organisation.”

Leahy quickly sought to extend his formula for success in North America to other regions. “When I got here, our vice president for China was sitting in a hotel suite in Beijing. That was the office. So we quickly broke ground for new quarters outside of the city by the airport. We put in a training centre, parts centre and vendors.”

Leahy told the Airbus board in 1995 that a market share of 50% should be reached by 2000, given that McDonnell Douglas was about to be merged into Boeing. That goal was met, but matching Boeing became an obsession that dominated Airbus thinking at times and led its leaders to make big mistakes.

 

The Two Big Mistakes

Two errors in particular stand out. In the early 1990s management still believed that the future of true long-haul flying was with four-engine aircraft, even though Boeing was already working on the 777, which entered commercial service in 1995. Airbus believed the A340 was the right aircraft to compete with the 777—after all, key airlines such as Lufthansa had encouraged it to go for four engines. Lufthansa still operates a sizeable A340 fleet, which it now regrets because of the high operating costs. And it was easy to sell the four-engined A340s to South African Airways ahead of the Boeing 777, as the A340’s extra two engines provided far better performance out of Johannesburg’s ‘hot and high’ OR Tambo airport in the event of the loss of power from one engine.

The second mistake was the belief that Airbus needed its own very large aircraft to compete with Boeing’s 747, which was suspected of generating monopoly margins. The first studies were conducted in the late 1980s; one was the ASX 500/600 study Aerospatiale presented in 1990 to airlines for comment. These analyses were part of the basis for the later A380 development work that led to industrial launch in 2000.

Looking back, the A380 is the symbol and result of a colossal misreading of the market. In the mid- and late 1990s, the 747 was past its peak—in spite of the 1988 introduction of the 747-400, a major upgrade. For years, smaller widebodies like the 767 had arrived in growing numbers on transatlantic routes. Then came the 777, which turned into a huge success. Airbus went after the wrong target.

The decision to pursue the A380 was not purely rational. Europe’s aerospace leaders wanted their own big jet. “The A3XX will still be in service when Airbus celebrates its centenary,” Pierson proclaimed in 1997, one year before he left the company at age 58. That enthusiasm was carried forward by Noel Forgeard, a representative of the industrial and political elite in Paris who took the reins of the company in 1998 and officially launched the A380 programme in 2000.

Airbus had grandiose plans for a family of A380s: The -800 was to be followed by the 800ER, then a stretched -900 and a shorter -700, plus a freighter. The A380-800 wing was designed so it could be used on a larger variant, which made it less efficient.

Some airlines also joined the euphoria. Virgin Atlantic, one of the original launch customers, promoted a view of the aircraft as a luxury hotel in the sky. The closest any carrier got to that were the famous showers on Emirates Airline’s A380s and the Etihad Airways’ first-class apartment. Virgin Atlantic never took a single A380.

Long before the 2019 decision to terminate the programme in 2021, it was clear the A380 would never make a profit. Airbus sunk more than €20 billion ($22.3 billion) into the project, but the aircraft, which entered service in 2007 with Singapore Airlines, was too big. It was superseded by more efficient twins like the 787, the A350 and the upcoming 777X. Yet, for all its challenges, the A380 was a technological success, and knowledge gained through the programme flowed into the A350.

 

Crisis Years

In 2005, a discovery that some A380 wiring harnesses were too short highlighted shortcomings in Airbus’ industrial system. The crisis led to a series of structural reforms that ultimately led to Airbus’ parent company merging with the commercial unit a decade later.

The A380 was not the company’s only headache. Having seriously underestimated the 777 in the 1990s, Airbus now grappled with how to respond to Boeing’s new 787. Its initial response—re-engining the A330—triggered an outcry among customers. Steven Udvar-Hazy, then CEO of aircraft leasing powerhouse International Lease Finance Corp. (ILFC), made sure Airbus understood it needed a better design. As described in one of Guy Leitch’s columns in 2007, Udvar-Hazy virtually single handedly forced Airbus to redesign the A350 with a larger fuselage – the Extra Wide Body (XWB).

So in 2006, Airbus made the crucial decision to launch the A350. The aircraft helped make up for the A340 mistake, and its relatively smooth development, testing and industrial ramp-up indicated that Airbus had learned many of the painful lessons of the A380 programme.

In 2007, Enders took centre stage in Airbus’ commercial aircraft business. He had risen mainly on the defence side of the company, serving as co-CEO of the parent company with Louis Gallois. When the board agreed that EADS should be run by a single CEO, Enders proposed that he head up the commercial aircraft business. He became sole CEO of the parent company five years later.

Enders once said it was less important to launch new aircraft programmes than to make money on those that are built. He nonetheless reluctantly agreed to the launch of the A350. As Bombardier was starting to make inroads into the narrowbody market with its new C Series, and airlines were demanding more fuel-efficient aircraft, Airbus launched the A320neo in late 2010. It had new engines, but as few other changes as possible from the first-generation aircraft.

Boeing initially tried to ignore the Neo, pushing ahead to develop a clean-sheet successor to its 737. But in a huge coup by John Leahy, Airbus won a big A320Neo order from American Airlines. “There was a big fight, and Boeing threatened to sue [American] because it happened before the end of the 20-year exclusivity agreement,” Leahy recalled to AWS&T. “But American said if Boeing wanted a share of the order, they would have to [produce] a 737neo as well. So they did it and did not even know what the aircraft was going to be like because they were so focused on the all-new single-aisle.”

Airlines have since ordered 6,504 A320neo-family aircraft, more than of any other aircraft in the space of nine years. The A321neo now controls the upper end of the single-aisle market and provides the basis for the A321LR, Airbus’ venture into narrowbody long-haul flying. It is also Airbus’ strategic weapon against Boeing’s proposed new midmarket airplane (NMA).

In another stroke, Airbus agreed in 2017 to assume a controlling stake in Bombardier’s C Series programme at no cost. Some called it the “deal of the century.” The cutting-edge aircraft now fills out the lower end of the Airbus portfolio and has forced Boeing to react by buying a controlling stake in Embraer’s commercial aircraft business.

In contrast to the commercial successes, Enders did not do as well in his bid to balance out Airbus by bulking up the company’s defence business. His 2012 effort to merge with UK-based military powerhouse BAE Systems was scuttled by the German government. But in the end, there was a silver lining: The French government was so concerned about future interference in Airbus from the Germans that it agreed to governance changes that would severely limit state interference in the company.

Enders was now free to make Airbus even more international, opening an A320 final assembly line in Mobile, Alabama, to complement a similar line in Tianjin, China.

When he retired earlier this year, handing over his responsibilities to Guillaume Faury, Enders looked back at his company’s history. “Launching Airbus today would be impossible,” he said with a view on the rise of nationalism and protectionism that also infiltrates European politics and business decisions. Given this assessment, it is even more remarkable that it was possible for Europeans to join forces 50 years ago, only a little over 20 years after the defeat of Nazi Germany.

In the early days, Felix Kracht put it this way: “In Toulouse, British bolts are torqued into German nuts using French wrenches.” That it is still happening may be one of Airbus’ biggest successes.

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