Airbus is planning a management shakeup amid fierce criticism that ongoing delays of a new military transport plane is damaging the reputation of Europe's aircraft maker, Handelsblatt has learned.
The company has been beset by production line problems in delivering the A400M military transport aircraft and has had to push back its promised delivery date three times.
Germany, which is Airbus’ biggest individual customer, is especially furious. It has ordered 53 A400Ms and the military has now been waiting for the new planes for seven years. The delays are becoming an embarrassment for Germany, which cannot carry out its obligations under NATO without the new planes. The German airforce has to rely on the outdated Transall planes, which are coming to the end of their serviceable life. Their erratic performance contributed, ultimately, to the late delivery of weapons to the Kurds in northern Iraq last year.
Airbus’ chief executive Tom Enders plans to explain at the end of February just how much the delays are costing the military consortium.
Company officials also say heads will roll over the problems: responsibilities will be reshuffled and "organizational consequences" are being considered.
Responsibility for the latest set of delays lies, ultimately, with Mr. Enders. The abrasive chief executive, who was once a reserve officer, has made a commitment to European governments. He has long been aware of the problems. Back in 2008, Mr. Enders had made Airbus Military, an independent unit at the time, part of the Airbus civil aircraft division, and had fired Managing Director Carlos Suarez and replaced him with Domingo Ureña-Raso.
German politicians want Airbus management to appear before parliament to explain the long delays to the delivery of military aircraft.
Germany was due to receive five aircraft this year but Defense Minister Ursula von der Leyen told Der Spiegel magazine earlier this week that she was now hearing hints that this delivery would be delayed.
I can’t believe the company has been unaware of these problems. They just hid them from the rest of us. Rainer Arnold, Defense committee member
The British and French are also affected by the delays.
German politicians meanwhile say the delays have done serious damage to Airbus’s reputation and say the company’s executives need to be held to account.
"A debacle of this magnitude must have consequences for management," said Florian Hahn, a defense expert with the conservative Christian Social Union (CSU).
Mr. Hahn wants Mr. Enders to appear before the defense committee of the German parliament, the Bundestag.
Many other politicians feel deceived by Airbus. "I can’t believe the company has been unaware of these problems. They just hid them from the rest of us,” said Rainer Arnold, a member of the parliamentary defense committee.
Tobias Lindner from the Green party warned meanwhile that the whole debacle has dented confidence in the industry.
The Airbus Military division, headed by Domingo Ureña-Raso, that is responsible for building the A400M has come under particularly heavy fire.
Many of Airbus’s problems come from a plant in Bremen, north Germany, where the transport aircraft's fuselage is made. It has come under fire from within the company for not complying with delivery requirements. Company insiders say the plant is definitely “part of the problem.”
The Bremen plant in turn has had problems with supplies from Premium Aerotec, an Airbus subsidiary based in Augsburg, in southern Germany.
The entire snarl-up with fuselages is a big part of the reason Airbus cannot raise production: it had to make more than the nine units it produced in 2014, but will now be unable to do that.
Jean-Marc Nasr, who heads up the defense company’s Europe, Middle East and Africa division, said the company was talking to customers and is trying to minimize the damage by juggling its delivery schedule with various buyers.
Even the aircraft that have been delivered so far are not equipped with all the features Airbus had promised. They are meant to have the capability for midair refueling and for dropping paratroopers and supplies. "
The company admitted it is still working on the “tactical capabilities” of the aircraft that have been delivered.
The delays in the yet undelivered aircraft, will cost Airbus. It is contractually bound to a precise delivery schedule and very delay results in a substantial fine. Investors had already been forewarned. The two previous delays in delivery of the aircraft, which was commissioned in 2002, cost Airbus predecessor EADS €4.2 billion, or $4.76 billion, and European governments had to pay another €3.5 billion. The company has reportedly created a reserve to fund further delays, but it is unclear whether it will be sufficient. By its own account, Airbus, under the current terms of its contracts, is already not making a profit with the 174 aircraft ordered to date.
On Tuesday Hellmut Königshaus, the parliamentary ombudsman for the armed forces, said that the problems were "increasingly affecting the ability to deploy troops, as well as affecting their level of training."
Berlin wants Airbus pay the high costs of continuing to operate the Transall, and it could also impose financial penalties.
Several feel Airbus is being unfair to its customers.
The German military’s chief of staff Volker Wieker told lawmakers that Airbus had in recent months offered to deliver a few of the A400M aircraft earmarked for France in 2015 to the German air force, as Paris was having financial difficulties.
And when Airbus representatives met with the German parliament officials two weeks ago, they did not mention any delays, even though Bernhard Gerwert, the head of Airbus's Defence & Space division, had told senior defense ministry officials that there would be problems with delivery.
Airbus is now in a weakened position as it enters negotiations over a number of large contracts. In the next few months, Mr. Wieker will have to decide whether an Airbus subsidiary MBDA Deutschland or U.S. rival Raytheon will be awarded the contract for delivery of a missile-defense system worth billions. Airbus is also bidding for a contract to develop drone technology alongside French and Italian partners.
Alongside these negotiations, the German government and Airbus will have to thrash out a deal on an outstanding case, on whether Airbus should receive €750 million in compensation, because the ministry cancelled an order for the last batch of Eurofighters.
Video: Airbus A400M performs impressive manoeuvres.
Till Hoppe began working as an editor with Handelsblatt in 2008, covering foreign policies. Thomas Hanke joined Handelsblatt in 2003 and is now based in Paris. Markus Fasse covers the aviation and automobile industry. He has been with Handelsblatt since 2000. To contact the authors: [email protected], [email protected] and [email protected]