Why Isn’t Airbus Doing Better?
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Walk up to this week's edition of aviation weeks. Check six podcast. By one large measure, airboat should be on top of the world. The company's only real competitor and commercial airplanes, boeing has been been set by numerous problems, including a fifty three days strike just ended but will take weeks, if not months, recover from air bosses managed to capture a commanding lead in the arrow body market over boeing up, ending the long held fifty fifty split.

But the european aircraft built there isn't doing as well as one might think, its ability to capitalize boing's wales is limited by the immense chAllenge of ramping up aircraft production. That chAllenges been exacerbated by supply chain bows that keep popping up, and the company's defense business faces its own set of chAllenges. So why isn't airbus doing Better? Joe anselmo and a toral director of the aviation week network and editor in chief of aviation week and space technology magazine.

Join me to answer that question. Are you flow to the leader of aviation with commercial aviation team? He is written about airbus from decades and joins us from Frankfort.

Robert wall is the london based leader of our global team of defensive space writers and special guess so tusa needs financial firm agency partners in london. He is also contributing aviation calmness. So yeah, that start up with you. Why is nearby doing Better?

Answer is a question that more and more people are are asking. I just had a conver a few days go with the fierce, terrible ted leader of D I E airspace listing company uh at at ice that and he said that you know it's already hard to understand how production is not ramping up in twenty four and you will be even harder to to understand if those problems persist in twenty twenty five. Obviously, IT comes down to supply chain.

The supply chain has not been able to ramp back up. But this is kind of the top down view. If you look into a little more details, I think it's interesting to see that smaller suppliers seem to be slowly improving performance, getting out of the worst of the of of the chAllenges.

But the big ones, the the pats g era space, uh spirit air systems in particular, are now the ones that are creating creating the issues. And just to put things into perspective, airbus is delivery target this year is seven hundred seventy aircraft that compares to seven and thirty five last year. Um so he doesn't like that.

You at least some growth. But really if you look into back five years, twenty nineteen, they delivered eight hundred and sixty three aircraft and in two thousand eighteen, IT was eight hundred. So there are still significantly off where they were before and obviously way of their targets.

Uh, if you look back at the first nine months of this year, the year nearby output was forty four aircraft per month on average targeted seventy five no, just three years from now. How is that going to work? The ah eighty fifty is at around five supposed to go to twice. The eighty twenty years at four is supposed to go to fourteen. So modern triple big chAllenges.

And put that context, yes I mean forty four five per month um still a long way to go their goal. But boeing goal was to get to thirty eight months. They've come nowhere near that. So air boss and is knowing as well as he wants to, what is certainly not doing is poorly as boeing, right?

No, it's not, but it's always IT hasn't had two of its Sarah dies crash and and one dropping part of a few of version flight.

Such user are welcome to the the podcast. You can react what answer said.

yeah I am that I thank you uh jay advice yeah I mean I just wanted fall up on that that compare me going and and I would say that the honest truth is that I suggesting held on higher standard now it's not a out comparison's bowing. Its how you are doing compared to how you have told us that you will do. And they're not delivering according to their own target.

And I do worry that airbus has talks really, uh, to two different sense of stakeholders. IT promises a huge amount t to airline customers because he wants to take orders. He wants to say, I can give you so many aircar in twenty, twenty eight, twenty, twenty nine, thirty.

And that encourages the company to Frankly be be optimistic about their ability around where are really, you know they're not delivering and where they only talk to investors. I think they would want to undertake mise and then over deliver. But what they're doing to airlines is over promising and under delivering and their cost between those you know how they deal with those two stakeholders.

And I can't see an easy way out of that, but it's a problem of their own making. Uh, you know, the competition is really not what we're talking about at the mind. It's the internal purpose.

Robert.

I thought that was also really interesting, especially if we think about the recent A Q three numbers that airbus put out. I mean, the fact that they're sticking to aircraft delivery guidance mean, you know, we've seen this with there was before, but they always fall far behind in the early in the year and then we'll have these incredible decembers. But what they're doing setting themselves up for this time, I mean, you know, IT just seems incredibly chAllenging in the fact that you this okay, where they kind of signaling and cut and guidance without doing IT. Okay, you can have that discussion, but I really be curious saucing ens, what youth thought about that and what you think the chances are that you'll get anywhere close to the seven .

seventy they were at four ninety seven at the end of october. So that's like now roughly two seventy to go, uh, in three months. I don't know, Robert. I mean, we've we've had we've seen big numbers now for decembers and novembers in the past, but this one seems seems to be really, really hard to achieve.

Yeah, I I, I, I grew that. And I think that what was very interesting on that the q three results, uh, management call was you imagine admitted that he said on recently the aircraft plus or minus twenty that which actually feels a quantity i'm OK is is not that bigger money? He just feels like IT I you there's a forty aircraft an error somewhere or or you more around that seven seventy um and that is very, very dependent on how many eco get out of the door.

You it's the the painful truth is that ever pays a ton of overtype between Christmas and the new year to get this aircraft out in december. You don't and if you don't have a employee, employee rather you great time to do Christal shopping. It's a fomented busy month and and this has never been a healthy way to run an aircraft company.

Air bus management are are clear aware of that, but it's just where they are a moment. So I think I think it's it's a uh again, it's a dem very demanding target. But manager have in the past, when they didn't, they can hit that target, rode back on IT and as they didn't dream became very arent that the you know the rich ramp is not happening and they they took us on the chain, I think deserves some credit that 昨天 的 发展 开始 涨。

IT would suggest to me that there may be a builder of aircraft, that they think they have a very high a problem of delivery. Eight, three, twenty one, X, L laws that were built but were held pending certification on the first delivery iberia to the last week. And now certification of liver is done. They may be altogether a whole loads of that now. And that's that's what give confidence.

Zh u. Wrote a really interesting colony we took live this week and aviation week where you noted that airboat and boeing share many the same suppliers, and some of those suppliers have really been weakened by boeing's problems. And when that happens, IT blows back on her bus.

I look in in, I think if we would do the work, the number supplies they don't have in common is way more than the number of supplies they have in common, particularly uh at the upper uh assure on the utter tears of the market. But the um the supply is that all the supplier that we feel most concerned about in the short term in spirit era system spare clearly in distress boating is uh has offered to buy spirit systems.

Ren CoOperated back into the boat corporation IT was fun out for boing about twenty years ago and generally sort IT out. But to do that they have to divert the airbus related work that spirit has taken on in, in the last twenty years. Um I was down the deal to uh announce the deal to to acquire businesses.

But there's a huge difference between the first releases is we're going to do a deal and actually executing on them. And in the meantime, boating production problems very, very heavily related to the uh the I M strike uh h in the seat area have been damaging spirit. They have been limiting spirit, ability to manage own cash lows and limits, ability to manage your zone um you the digest spin out of the airbus business IT, it's very, very painful. And industry when you realize that one competitors loss is not the other competitors game, you can have a lulu's situation. And with some of these mutually important subcontractors, that's the case.

Roberts, um we always right talk about their bus commercial, but they also have a pretty big defensive space business. How's that doing?

Yeah I mean, the parallels with boeing are always funny, right? Because you can maybe not on the scale of bowings boys but you know in defense certainly uh and space now um I was again has you know you find parallel programs for the kate you know take the bowing casey forty six saga but has got the eight four hundred and and you look at some of the um you know the the crew issues for for boeing and you know airbus has got big issues right now with its uh telemundo ation uh satellite, the geo satellite because that market has really has really tanked.

And we've seen charge after charge on on over the last two years in the space division, Frankly. Now on defense, my mine impression is they seem to be now you know finally after what decade plus through the worst of the eight hundred m and um the numbers are starting to turn you more positive from them in defense. But space um interesting they didn't take another charge in q three, but I I felt an accuse was such reading on this.

I felt they basically telegraph we have one more pretty significant charge to come and probably with you for because they kept talking about one big program on which they were still doing a review. And IT certainly sounded like IT wasn't a question of what would be a charge around this program. But how big will I have to be? Because I think they are pretty clear this Better be the last one.

I agree with you except that i've said this had a bit the last one for about the last couple of years and i'm finding quite, quite brust by my optimism that spect at the space is dreadful.

Being an incumbent um in a being big of space is really difficult in um um a market which is being taken to pieces and revealed very much in the um uh in the model space x uh and the you know the the large geo station of satellite markets is being again just dismembered by the market for a small lower but uh satellites tes with be a very large consultations uh until you if europe express company, you're used to producing the hundred and fifty million dollar law satellites tes that sits up ten, twelve, sometimes fifty years just broadcast T V or also forth. Big space almost doesn't know what a look I have behave. And I think that's why we're seeing similar problems on both sides of the atlantic.

IT takes a hell of a long time to come to terms of this and even longer to restructure, uh, this because your asset base is dominated by these very large the station with satellite. I agree with the eyes. I mean there's clearly one lost program to go um from the comments on the call, IT sounds like he is a uh a program with multiple satellites involved because they talked about hungry to set the probability every single one um and I get this is more likely not that that there will be a charge that ultimately being a big incumbent in old space defense is no longer that at the license print money that IT was but you can make your own problems worse and that's that's I think what industry find very, very frustrated .

yeah and I thought was quite interesting would be you know as you to the idea that is a multi satellite uh effort and if this is the the basically the U S. Satellite um factory, which is kind of their big bet on new space and looks like IT actually done OK. You know they they want some programs through that as a sub contract or at least with the U S.

Government, which is always obvious. Ly been a chAllenge for for airbus. But you know if IT looked like they, by doing that, had kind of actually opened up and a good venue for them into this new space domain. And if this now becomes and i'm not saying IT is, but if this were the charge and that would be pretty unfortunate in that respect because that would really get that issue that they they they at least prepare themselves for the future. Um so yeah really cares to see games.

Boeing has had some big shakeups and leadership, obviously a dave cw home step down as CEO was replaced by Kelly oberg ted kober was assa decided the defensive business air bus is just announce some changes in its leadership too, but it's not quite .

the same as IT. No one was fired, but that was has announced who's going to succeed Christian hero as the CEO of the commercial aircraft business. Quite Frankly, it's a bit of a mystery to me what's happening. Uh, I do hear some people inside airbus, uh and what they are saying is that Christian has indicated that he would like to retire or can imagine that he will retire fairly soon.

He will be sixty four in twenty six so he could still continue if he wanted um but I think that coincided with the term of laz varka as as M T U uh C O ending at the end of twenty five and he has an abb background, has been in with a bus for twenty years before moving on to and to you in twenty and fifty, has been there now nine years next year be ten years. But he's got a very, very good reputation at ambas as a as a as a production specialist, which uh is probably not insignificant. So I guess Christian seem to be indicating that he wouldn't mind living in a not too distant future.

And laws became available and so I bus raped the opportunity and went for a new guy at the top of its commercial aircraft business, an engineer airspace engineer uh with experience inside abbas in production. Then you moving into the engine business, which is also highly relevant for a bus as they design and prepare their next generation everybody. So um a transition that seems to make a lot of sense at this time.

such how's that being viewed in the .

finance community? Know that about IT, I know last been in their current job you know than a couple of years. And uh so you know there were there were and still are lots of high cross rates. I think yes, actually hit the nail on the head um which is describing lsa as of production specialist and that's what of us needs for two reasons.

One the ramp, the production rate rap is not working at one the h two a three twenty is supposed to be getting to break seventy five seventy five background ft a month um in um uh twenty twenty six like twenty six twenty seven um and at the moment, in a ruling average basis, it's been flat forty eight a one for the last year. There is clearly a production problem within the a three twenty system that needs massive focus. I think there's an admission here.

Test the airbus has got internal problems with so they've been upgrading their family stabling lines to make them all eight, three, twenty one A A incredible sensible thing to do. But is the cause some disruption? They've had internal problems with other structures.

They they clear got big external problems with subtraction ors. Apple doesn't need anymore somebody whose background and and whose um you know real skills are in sales. Airbus has got enough orders to keep into the end of the decade and beyond.

IT really needs a production guy and is somebody who thinks about production problems from the inside out, not deliveries from the outside in. And I think this is an admission that that, you know, I was internally needs a complete change of mindset. And uh, i'm sure i'm sorry, the chief executive rebels group is going to continue to be very, very closely involved uh, with a bus commerce.

I would see him moment just being the C E O. And last value is being an incredible valuable chief Operating officer. It's A C, A, O that airbus needs .

now such I still don't. I mean, if you if you if you weigh the external problems yeah with suppliers against the internal ones, I don't if you had to put a ratio on this now, is that seventy percent external, thirty percent internal structural legacy lines not performing? What's your guess .

at something about that? Maybe twenty five, twenty five, but I think the fact that there is even a twenty five thirty percent nal problem is something that and and that that hasn't changed, that hasn't improved. So you they clearly adverse absolute reference with the engine guys and then not that place with safran either, uh, on cabinet and self. But I think I think the fact that has actually eternal problems in the last two years, as I think is has become a sort become a real running problem, I expect causing a huge and outside at night.

I I visited them, I think a year and a half ago, I for kind of a really a really deep dive into hamburger production. And what I realize is how cautious they are in modernised ing this because they were at the same time they were ramming up trying to ramp up, and they were sort aware of the concern that by changing too much while ramping up, they they could screw screw IT up and that .

smart that really is. And they have the problem with the remember the airbus cain flags, which six years ago, now seven years um they're aware of how delicate those production lines are. That means you're changing.

right? That means if if you keep the system, you ramp up, but you're not changing the structure and which which which is probably that something that should do right?

Well, I think they waiting for the next, I think they can afford to make the next aircraft. They can't. No, I think the'd got to start modernizing the production system ahead of the next ah the next model, whatever the next model lives. So they they actually get a some way to deep bugging a new production system rather than changing production system and aircraft design at the same time. That would be a, but in a way that lucky.

because, right, they they can do IT in one site. They, they can take one of the lines down in hamburg, for example, on that I earn IT out while they you know, the other stuff keeps going right lines and to lose and then the in the U. S. In china.

yeah I I I agree if I think they should have have been more innovative, more experimental with the to lose site, which they they're done a huge rate of the to lose narrow body lands you need to lose is almost the article um because all the investment have gone as you say and Franks um mobile and gin, they should have done something radical with to lose and use that was surprise the prototype for the production .

system but they were burned so much in hamburg uh with the the file for that for to lose the approach with different they change, they realized and hamburger, they change too much. They cause huge, huge disruption on the on the x on the cabin flex and and then they thought, OK, let's just not innovate so much in to lose, just do that. Even the logistics is more automated, but the line itself isn't.

Well, I think such as point is, this is the right. I think you've got to do risk less. You're gonna do IT now because you gonna have all these unknown surprises on the next plain. Anyway, might as well I am some of the and I think we should probably note with Christian leaving, that is also a kind of Marks a bit of a history point with A, I mean, Christian is is airbus royalty to some extent and you know his roots are go back to is for the to the founding of airbus. And in a way, his departure really is, as far as I know, and maybe against wouldn't need to correct me on this, but in the way, he's kind of the last a tie to that historic moment at arba. So I think his departure is it's a bit of a moment.

Yeah, he has clearly he has personal tied to that very know that to that are early phase of apples. He was standing on the roof of a to lose airport when his father, good to took off in the first eight hundred on the on the first light of the eight hundred, holding hands with his mom and hoping that everything would go right, uh, in on that first flight. Obviously I did but yeah that's how far back he he went and as an intern at abb h Christian uh was on uh one of the first eight hundred delivery flights to um to the U S. So yes, it's clearly realty.

Yeah and they gone right as you said.

Indeed, IT has since then company came up about an nowhere to a be the world's leading aircraft company. Unfortunately, guys, that's all the time we have for today. Um I want to thank you all for your insights and a special thanks to our past producer in london.

Guy funnier, don't miss the next episode by subscribing to check six in your podcast APP of choice and one last request. If you're listening to us an apple podcast and want to support this podcast, please leave us to start rating or review buy for now. And thank you for your time.

Get face to face with aro space m and a leadership on november twelve at the aviation week A N D merges and acquisitions conference taking place in los Angeles. Learn what's hot and what's not and understand the implications of the upcoming elections register at events dow aviation weak dot com and use the promo code check six to save twenty percent.