EADS has made mistakes as well as Airbus. Now, like Boeing, the parent company must take tough decisions and impose its authority

All the focus on the A380's troubles is helping mask much more deep-rooted problems at Airbus - the biggest of which is how on earth it can raise enough cash to develop the aircraft it needs to take on Boeing in the volume market segments in the next decade and beyond. And whether it can cut its costs sufficiently to compete with its arch-rival in what is likely to be for some time a weak dollar global economy.

When it celebrated its fourth birthday in August 2004, EADS and its 80%-owned Airbus subsidiary - created a year after EADS as an integrated company - looked like heady European industrial projects that had succeeded despite themselves. The two chief executives and two chairmen, the divisional structure that ensured that French senior managers reported to Germans and vice versa, the 20% share in Airbus retained by BAE Systems: all seemed to defy every rule of sensible corporate practice. Yet both organisations were flourishing.

Under the understated stewardship of Frenchman Philippe Camus and German Rainer Hertrich, EADS had begun to sort out its underperforming defence and space businesses and was robustly targeting the Asian and US marketplaces. As Boeing lunged from the sweeping redundancies of the post-9/11 orders collapse to the failure of the Sonic Cruiser to corporate scandals, its European rival - under Noël Forgeard - had captured market leadership and was working furiously to get the world's biggest airliner airborne. Camus, Forgeard and Hertrich were hailed as supreme industrialists who had proved that a complicated conglomerate, formed from four countries' aerospace industries and with five major stakeholders, could be enterprising, well run and successful.

How did Airbus and EADS get into this mire in the first place? The main reason is that EADS was not managing Airbus tightly enough under Forgeard, who ran Toulouse - even after he moved up to become EADS co-chief executive - as his fiefdom, proudly broadcasting all the successes but being either secretive or unaware of the looming industrial problems. Camus and Hertrich and the rest of the EADS board at the time are almost certainly guilty of giving the Frenchman too loose a rein.

This is the reason Christian Streiff had to go: not because he was the wrong personality or nationality or did not have enough experience of aerospace. But because Airbus does not need a Napoleonic boss at Toulouse it needs decisive leadership at its parent company, which can lay down clear strategic targets for its biggest subsidiary, appoint a capable person to achieve them and regularly monitor his progress. As someone says in our analysis piece on P20, Streiff did not seem to understand that Airbus is a part of EADS, not the other way around.

When BAE Systems owned 20% of Airbus, there was an excuse for running the airframer at arm's length. It was an integrated company, which happened to have EADS and BAE as shareholders. Now that it has just one parent there is no reason for EADS not to run its commercial aircraft division in exactly the same way as Boeing oversees its Commercial Airplanes unit in Seattle, with a big-name chief executive with the autonomy to make the sums add up, but ultimately part of and answerable to a corporate boss and board of directors.

In a market as cyclical as mainline airliners, with just two players, no one should write Airbus off. But it is difficult to see the European company regaining leadership from Boeing in the same sort of three-year timescale as it took for it to lose the dominance it established in the early part of the decade.

Boeing climbed out of the hole it found itself in in the early 2000s by taking decisive measures including axing tens of thousands of staff, swallowing its pride by binning the Sonic Cruiser, switching its head office to Chicago, and getting rid of two chief executives. Its then-7E7 represented a radical departure, but it stuck with the plan, which included farming out a much larger proportion of the programme to global partners than it had ever done before. The result - despite a flattening defence business - is that Boeing is now in rude health.

EADS must do the same and start putting in place now plans to reinvent itself with a small but strong and focused head office under one chief executive - realistically when the current chief executives' contracts are up - fully in control of its civil aircraft business. Who knows, a name change for EADS may cement the cultural change: what about Airbus?

Source: FlightGlobal.com