Go for AIC and A3XX

Citation

(2000), "Go for AIC and A3XX", Aircraft Engineering and Aerospace Technology, Vol. 72 No. 6. https://doi.org/10.1108/aeat.2000.12772faf.005

Go for AIC and A3XX

Go for AIC and A3XX

Keyword: Airbus

The partners in Airbus Industrie, the European Aeronautic Defence and Space Company (EADS) and BAe Systems, recently announced in Paris the formation of an Airbus Integrated Company (AIC) and agreed to give the "Authorisation to Offer" for the A3XX.

The successful completion of AIC negotiations, which have been a long-held objective, will create an organisation positioned to maximise its profitability and share of the global airline business worth around $60 billion-a-year.

EADS will hold an 80 percent interest in the Airbus Integrated Company and BAe Systems 20 percent. In addition, BAe Systems will have the right to enhanced dividends on its shareholding based on deliveries of A340-500/600 aircraft above an agreed rate over a ten-year period. Based on current economic conditions, this could yield anything up to Euro 237.Sm to BAe Systems. The amount will be indexed to future growth in the company.

Airbus will have a consolidated annual turnover of more than Euro 15.7 billion and provide the impetus and strength for the long-term development of the European aerospace industry and global marketplace.

A shareholder committee, with five appointees from EADS and two from BAe Systems, will decide on all shareholder and strategic matters. The Airbus shareholders will hold rights to approve a three-year rolling business plan. The first chairman of the AIC will be Rainer Hertrich. An executive committee, including two nominations from BAe Systems, will be responsible for the business (Plate 1). The first chief executive officer will be Noel Forgeard.

The AIC will be an integrated organisation under the day-to-day control of a single, focused management team with the objective of delivering customer satisfaction, improved operating performance and greater shareholder value.

Plate 1 The Executive Committee of the European Aeronautic Defence and Space Company (EADS). From left to right: Dr Dietrich Russell, Axel Arendt, Francois Auque, Rainer Hertrich, Jean-Paul Gut, Philippe Camus, Jean-Louis Gergorin, Alberto FernÄndez, Dr Thomas Enders, Noel Forgeard, Dr Gustav Humbert

Under the terms of the agreement, the partners will transfer all their Airbus related design, engineering and manufacturing assets located in France, Germany, Spain and the UK to the new Airbus company. Incorporated in France, the AIC will employ some 40,000 people at locations in France, Germany, Spain and the UK.

Both shareholders will benefit from the efficiencies and savings, estimated at Euro 350 million by 2004. These benefits will be achieved by bringing Airbus engineering and manufacturing assets into the new company, which will concentrate research and development and thus provide critical mass to fund new programmes internally. It will reportedly also produce economies of scale through technological leadership together with greater purchasing power.

Although all of the Airbus partners have reduced their individual cost bases over recent years, AIC will further enhance Airbus's competitive position by concentrating purchasing power, removing duplication and cutting overheads. In particular, customers will, it is thought, benefit from a fully integrated customer support organisation.

According to AIC, the primary strategic objective of the new company will be to increase its competitiveness and to outperform its competitor in the interests of shareholders, customers and employees. Its priorities will be to maintain and build on its market-leading products and technologies.

Philippe Camus, co-CEO of EADS, said: "This is an historic day for Airbus. Our landmark agreement and the Authorisation to Offer for the A3XX are tremendous news for the European aerospace industry and testimony to the faith and commitment of those who founded Airbus Industrie so many years ago. AIC will give Airbus the industrial structure it needs to continue its outstanding success in a lucrative market. This will give additional boost to EADS right from the very beginning".

Mike Turner, COO of BAe Systems said: "Airbus has always been the flagship of European cooperation. It will now be the flagship of European competitiveness as well. BAe Systems and EADS will strongly benefit from the efficiencies and savings that a single company will bring. Airbus has grown from a standing start 30 years ago to a turnover of almost Euro 16 billion in 1999 and that position will be further strengthened by the A3XX programme. The progressive launch of an innovative, high technology family of aircraft has underpinned that growth."

Rainer Hertrich, co-CEO of EADS: "Coming from a history of loose but already very successful cooperation, we are now entering a new level of European industrial integration. The AIC will give a boost to Airbus market performance and it is the right industrial basis for A3XX – our twenty-first century aircraft that will set the standards for decades".

The decision to give Airbus Industrie the authorisation to offer to customers the new large aircraft marks another major milestone for the A3XX programme. This "Authorisation to Offer" (ATO) is expected to lead to a full industrial launch of the programme at the turn of the year.

The ATO provides the impetus to turn the significant expressions of interest airlines have already shown into firm offers, subject to obtaining enough commitments for A3XX to proceed to full launch. More than eight leading customers have already expressed interest in the A3XX family and there is confidence that a strong market exists for this valuable new addition to the Airbus range.

Airbus Industrie managing director, Noel Foregard, said: "The market has signalled loud and clear that it wants the A3XX, and this has been recognised by our shareholders who all fully endorse the programme. We shall now proceed to firm up the announced expressions of interest."

Physical assembly of the A3XX will take place in Toulouse, while interior furnishing and customisation will be done in Hamburg. In addition to the final assembly work and customisation, A3XX fuselage sections will be produced at the existing sites in France and Germany, as for the other Airbus airliner programmes. The wings will be produced in the UK, while in Spain the horizontal stabiliser and other parts will be produced. Some ten additional manufacturers have already signed up to participate in the development and production of the A3XX.

BAe Systems

BAe Systems is a full partner in the European plane-making consortium Airbus Industrie. Partnership shares are: Aerospatiale Matra of France 37.9 percent, Daimler Chrysler Aerospace Airbus of Germany 37.9 percent, BAe Systems 20 percent, and CASA of Spain 4.2 percent. The Netherlands, through Fokker, and Belgium, through Belairbus, are also associated with some Airbus programmes.

The prime industrial responsibility of Airbus UK is the design and manufacture of high technology wings for all Airbus models, as well as overall design and supply of the fuel system. For most Airbus models the company is responsible for overall design and supply of landing gear and, in the case of the A321, overall design and manufacture of one section of fuselage.

British involvement in Airbus dates back to the mid-1960s when design concepts were first exchanged with major European aircraft manufacturers. In 1967, the British, French and German governments signed a Tripartite Memorandum of Understanding which initiated the A300 as a project study. On 28 May, 1969 the Airbus programme was launched by the French and German governments, with BAe Systems participating in a sub-contract role with responsibility for the design and manufacture of the wings. On 1 January 1979, BAe Systems (then British Aerospace) became a full decision-making partner in the Airbus Industrie consortium.

For each and every Airbus model BAe Systems, from its own resources, has invested very substantial sums in the launch and on-going development costs, as well as in tooling and work in progress. In addition, for the A320, the A330/A340, the A340500/600 and recently for the A3XX, the UK Government providing fully repayable loans which are "designed to yield a return in real terms on the government's investment" to supplement BAe Systems' financial commitment.

Repayment of capital and interest on the UK government's £250 million loan for the A320 (announced in March 1984) has been completed; royalty payments continue – the investment yielding £2 for every £1 invested. The loan for the A330/A340 programme announced in May 1987 is £450 million, repayments are in progress and are expected to yield the UK Treasury £3 for every £1 invested. The loan announced for the A340-500/600 in February 1998 was £123 million and on 13 March this year the UK government announced it would make available £530 million repayable launch investment for the A3XX.

BAe Systems is responsible for a share of industrial work in Airbus which broadly reflects its 20 percent partnership share. BAe Systems' Airbus business, Airbus UK, manages participation in the Airbus Industrie consortium from its headquarters at Filton, Bristol which is also home to its main design and engineering facilities. Its manufacturing activities are undertaken primarily at Broughton, Flintshire, North Wales and some manufacturing is undertaken at Filton. Together these two sites employee around 8,000 people.