<B>A European success story</B>

Isabelle Birambaux. Correspondent. Dernières Nouvelles d'Alsace

29 March 2005

The Airbus A380, recently unveiled in Toulouse, is a symbol of European industrial achievement. Seating 555, the A380 is the largest passenger aircraft ever built. Its creation is the result of a desire to build a strong Europe, independent of the United States, especially in key sectors like aeronautics.

When the Berlin Wall fell in the 1990s, Europe was exhausted from years of the Cold War. Defense budgets were down. It became clear that creating a strong Europe meant development of its industrial fabric - especially in the strategic sectors of aeronautics and defense – so it could compete with American industry. This gave rise to the new European consortium, EADS, whose objective was to join the forces in Europe to promote competitive industry at the cutting-edge of technology.

Building a plane like the A380 was the technological and commercial challenge Europe needed to free itself from the Americans. In the early days, the idea was to build a plane capable of transporting 800, the A3XX. At that time, EADS did not exist and Airbus had four main shareholders - Aerospatiale (France), DASA (Germany), British Aerospace (U.K.) and CASA (Spain) - who shared construction. The A3XX never saw the light of day. Germany and France couldn’t agree where to build it. While Mssrs Kohl and Schröder defended Rostock and Hamburg, Lionel Jospin’s French government wanted Toulouse. The project was forgotten when DASA began negotiating a merger with BAe. At the last minute however, the British decided to merge with compatriot GEC.

Talks of merger between DASA and Aerospatiale began. This project led to EADS, which became Airbus’ majority shareholder in 2000. The A380 project was launched that June, with a budget estimated at € 11 bn.

The project became a growing concern for the U.S., and sparked a merciless commercial war between Boeing and Airbus. Threatened by its European competitor, Boeing countered with an even larger plane that would fly near the speed of sound. Then management changed strategy, moved toward medium-sized planes, and introduced a new model instead, the 7E7. This would replace aging DC10s and Boeing 757s and 767s. The Americans believed that the future of commercial aviation lay in medium-sized planes suitable for city-to-city flights, while Airbus committed to growth in passengers and long-haul airports. At the same time however, it decided to compete with the U.S. in the medium-sized aircraft sector with construction of the A350, a 350-seater. This was the Airbus answer to the 7E7, which, according to Spain’s daily El País, has received 126 orders to date.

Strategic spearhead

Airbus has dethroned U.S. giant. Since 2003, and for the second year running, the Europeans have reported better results. Boeing has 285 planes on order, Airbus 320. The monopoly of the 747, which lasted over three decades, is over. The Airbus success is a slap in the face for the Americans, the demise of a myth in the world of aviation.

This commercial conflict got hotter and the Americans cited the European Union for providing Airbus with subsidies blocking competition. Boeing pressured the U.S. government to cancel the deal signed by the U.S. and the EU in 1992, which set a limit for subsidies to the aeronautics industry. It threatened to appeal to the WTO to enforce a 1994 text that prohibited all subsidies. Airbus counterattacked, informing Brussels of the subsidies Boeing received for building its 7E7.

The list of orders for the A380 prove the European firm has recovered from losses in 2002. With Airbus, EADS can now defend its position as world leader in the commercial aircraft sector. It is the world’s second-largest company in fabrication of missiles and defence systems, the third in military transport aircraft and satellites, and the fourth in combat fighters. This series of successes strengthens the EU, and makes the consortium Europe’s spearhead for achieving its political objectives. Consolidation of a strong industry capable of competing with North America is a project that could get the go-ahead if EADS keeps growing.

France’s economic daily Les Echos reported that the European consortium is considering purchasing Thales, the French defense electronics group. This would be a new step in the concentration of Europe’s defense sector. The EU knows that its credibility depends on developing a competitive industry and favoring the interoperability of military equipment and research. Building the world's largest commercial plane is the first step in this direction. Europe is multiplying its initiatives to show it doesn’t want to limit itself to merely industrial and technological success. It has created a European armament agency to replace the OCCAR (Organization for Joint Armament Cooperation),to promote and coordinate harmonization of military equipment.

Spain is making new gestures of support for the EU in these objectives, and backs Europe’s aeronautics adventure. Its return to the lap of the EU after the 2004 elections, and its withdrawal from Iraq, confirm the country’s change of political direction. Industrially, Spain has always shown interest in European projects like Airbus, in which it has a 10-percent stake. The president of the Spanish government, José Luis Rodríguez Zapatero, has announced his desire to increase this figure. According to El País, upping Spain’s share in the A380 will be difficult, since its European partners would have to reduce theirs. However, the A350 project could leave room for more Spanish participation. This would let Spain play a greater role in the industrial takeoff of the EU and in its political construction.


#IECampus, the Campus of the Future

See video
Follow us
IE Agenda
Most read
IE Business School | María de Molina 11, 28006 Madrid | Tel. +34 91 568 96 00 | e-mail: info@ie.edu


IE Business School

María de Molina, 11. 28006 Madrid

Tel. +34 915 689 600