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Aviation History
1978
1978 - 0017.PDF
FLIGHT International, 7 January 1978 19 A300's Atlantic bridgehead BILL SWEETMAN reports from Miami SOME TIME in March the most important decision to affect European aerospace in 1978 will be taken. Not in France, not in Germany, not in Britain, but in Miami. If Eastern Airlines decides to place a firm order for 28 Airbus Industrie A300B4s, the European consortium will make up a lot of competitive ground on the hitherto invincible giants of the US airliner industry. Not surpris ingly, Airbus people are wary of the hubris involved in assuming that Eastern is in the bag, and are even more reticent about what might happen if the US airline rejects the aircraft. It is not normal precedure for a manufacturer to give aeroplanes away. At least not in the USA, where the financial details must all be filed with the US Government and most of them eventually published. The first impres sion is that such an arrangement does not speak very well of the product, but the circumstances in which the present trial of the A300 was set up were anything but normal. The "no-charge lease" of four A300s to Eastern is a product of the situation in which the manufacturers and the airline found themselves in early 1977. Airbus Indus trie was at rock bottom. Eastern was caught in a vicious circle, in which it couldn't finance new equipment without better financial results and could not significantly improve its results with its existing equipment. It is hardly surpris ing that the deal which emerged was not exactly con ventional. Eastern interest in the A300 began to firm up in the first half of last year. 1975 had been a good year for Airbus, and 1976 an extremely bad one. Boeing beat Air bus for a Singapore Airlines order; Transavia ordered an A300, then cancelled it and bought a 737. Finally, in January, Western found that Boeing and McDonnell Douglas were making an offer it couldn't refuse. Airbus found itself with a problem. The A300 had been taken to Western with at least the beginnings of a solid track record behind it. Airbus had a firm price, a history of high despatch reliability, a proven product and early delivery, but they were not enough. Nobody, at least with in Airbus, was saying that the Americans were incurably chauvinistic, but there was obviously a disadvantage in not being Boeing, McDonnell Douglas or Lockheed. It was more psychological than anything else. How could Airbus overcome the NIH (not invented here) factor? Eastern will freely admit that its record of profitability is not the most impressive in the US airline industry. Since 1970, however, it has been experiencing some new styles of management from its current chairman. Some of the new ideas are slightly reminiscent of the less way-out proposals of Avis' Bob Townsend, of Up The Organisation fame. One of the Townsend techniques is to clear the mind of all preconceptions, and to approach the problem with the attitude of somebody who knows nothing about it. Townsend calls it the "Man From Mars" tech nique. Eastern has the next best thing: former astronaut Colonel Frank Borman, commander of the first manned spacecraft to circle the moon. Borman has moved Eastern's management structure, as he puts it, "from a classical Harvard Business School management down to a few people with more authority and the requirement to succeed." Eastern's vice- presidential force, which would have overbooked a Fokker F.28 when he took over, would now almost fit a Shorts 330. Like Townsend moving into Avis, Borman was told that he'd have to hire a whole management team, only to find that reform of the system worked better. Every one of the managers who report directly to Borman was with the company before the ex-astronaut joined. Some problems, however, are hard to solve by innovative management alone. By the mid-1970s Eastern had traced some of its commercial problems to a series of decisions taken in the late 1960s which have placed it at a dis advantage relative to Delta, its main competitor. "Today," says Eastern vice-president planning Dr Morton Ehrlich, "we come to the conclusion that, if Eastern had made the same decisions as Delta, we could improve our profitability by $45 million a year." By any measure, that is a lot of spilt milk not to cry over. In the late 1960s Eastern moved heavily into Lockheed TriStars, while Delta divided its efforts between acquiring the new wide-bodies and stepping up its fleet from the 727-100 into the far more economical 727-200. The result is that today Eastern has an average of 115 seats per aircraft compared with Delta's 140. For the benefit of those to whom high load factors are an object of worship, Eastern vice-president Russ Ray explains: "In non-peak periods we are outperforming our competition, but not in peak periods because we are capacity-constrained." Delta
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