SPIEGEL Interview with Airbus CEO Thomas Enders 'EADS Should Never Have Signed the A400M Contract'
SPIEGEL: Mr. Enders, on December 31 you won a bottle of champagne. You had wagered that Airbus would manage to complete 12 of your super-jumbo jets by the end of the year. That bottle could cost your company millions because, in the heat of the race against the clock, quality and safety may have fallen by the wayside.
Thomas Enders: No, we haven't made any compromises here. Our customers are generally very satisfied with the A380. But, as you know, it is an extremely complex aircraft, which now unfortunately -- like every new model during the introduction phase, I might add -- has some teething problems here and there. We're working intensively on this. And let me say this right away: None of these issues are related to safety. I've heard that SPIEGEL was recently leaked a very interesting document regarding this issue
SPIEGEL: in which Emirates, one of your major customers, complained on page after page about the current problems with your aircraft. These include singed power cables, bent sections of paneling and much more.
Enders: We take every piece of feedback from our customers very seriously. I don't want to play anything down. But I'll say it again: We're working on it and we'll soon have the problems solved.
SPIEGEL: Where exactly are the problems?
Enders: Our internal processes have to be improved even further. For example, we still have too much reworking to do during final assembly. Something like that eats up time unnecessarily. But we're getting better and faster every day. We'll make it! And for the record: The latest problems have nothing to do with the wiring, which gave us major difficulties at the outset.
SPIEGEL: Is Emirates asking for money back?
Enders: That's not what it's about. The important thing is that we support our customers during the introduction phase and quickly get the problems under control. That's what our customers demand, and it's also in our interest.
SPIEGEL: Nevertheless, you want to deliver 18 aircraft this year. Are you sticking to that plan?
Enders: That is the plan.
SPIEGEL: We would be happy to make a new wager that it will be fewer than that.
Enders: Betting on the same thing twice is not very original.
SPIEGEL: You have already sold 200 aircraft. How many A380s will it take before you earn your first euro?
Enders: Every A380 contributes to the company's success, which was very presentable last year. And if you tell me where the break-even point is with the Boeing 787, I'll tell you where ours is with the A380.
SPIEGEL: We assume that you will have to sell another 400 to 600 aircraft to break even, which would be equivalent to roughly half of the global demand that you yourself have predicted for this class of aircraft. But how valid are all the old plans for the future now?
Enders: There is no doubt that this crisis will massively shake up the entire aviation industry. The main thing is to get through this lean period and set the right course now for the future. After all, aviation will continue to be a growth industry after the recession.
SPIEGEL: What does the crisis mean in concrete terms for Airbus?
Enders: That we will sell fewer planes this year than we did last year and we will have to reduce production. But we have full order books -- enough for seven years of production, based on the figures.
SPIEGEL: For the time being. The International Air Transport Association (IATA) fears that in 2009 alone customers won't be able to accept delivery of half of all ordered aircraft.
Enders: That's nonsense. I don't think much of those who want to attract attention with doom-and-gloom scenarios. In any case, thanks to our much-criticized Power 8 cost-cutting program, we correctly positioned ourselves well in advance of the current crisis. If we hadn't launched this program back in 2007, it would have to be created today. And, as I said, we are reducing our production. Instead of the planned 40 aircraft in the A320 family, by the end of the year we will only be assembling 34 planes per month in Hamburg and Toulouse.
SPIEGEL: In concrete terms, does this means reduced working hours? Or laying off subcontracted workers who, at your Hamburg plant alone, make up roughly one-third of the workforce?
Enders: Slow down! We're still a long way away from taking such steps. I see it as important in our planning that we can ramp up production quickly enough when things pick up again. And that will require a lot of good people.
SPIEGEL: It doesn't sound like you are planning large-scale layoffs.
Enders: Of course I can't rule out the possibility that we might have to make further cutbacks. But we have a certain cushion before we have to cut into the muscle.
SPIEGEL: How many cancellations has Airbus already had to absorb?
Enders: Fourteen since the beginning of the year. But nearly all the freed-up production deadlines are now being used by customers who wanted to receive their jets earlier. What's important is that we secure each of our individual deliveries. That's difficult because the financing system by the banks is still not in the best of health.
SPIEGEL: Germany and France -- where both major shareholders of your parent company EADS are located -- would now like to help out with export credit guarantees. It's a strange business model when your shareholder countries lend money so your customers can pay for the jets.
Enders: We're talking about guarantees here, the famous Hermes covers (Ed's note: "Hermes cover" is the commonly used name for a guarantee issued under the German government's export credit guarantee scheme, which protects exporters from risk). This is a common business practice for large-scale industries around the world. I think it's realistic to say that this year roughly half of all deliveries will receive such guarantees.
SPIEGEL: That could distort competition among airlines.
SPIEGEL: Lufthansa argues that it's primarily ailing airlines which benefit from such guarantees. It says that this punishes airlines that are well run and still finance their planes themselves or can pay for them with their own money.
Enders: That doesn't make sense to me, particularly since the guarantee process is nothing new. It's been there for years -- also in the US, I might add -- and has brought a good deal of money to these countries. It's certainly not a handout.
SPIEGEL: Dying airlines are kept alive longer.
Enders: Wrong. The government agencies that grant the guarantees carefully examine creditworthiness and business plans themselves.
'We've Made Big Mistakes'
SPIEGEL: Your biggest worry is currently the planned A400M military transport aircraft, which has been in the news for months. Which countries could cancel as buyers in the future?
Enders: Up until now, none have canceled. The A400M customers are currently examining the program, though. We'll see how it goes when this process is completed.
SPIEGEL: Germany is threatening to completely withdraw and France is considering reducing its order. It doesn't exactly look like a promising future ...
Enders: Objection! If we can manage to get the program back on course now, the A400M will be a success story. That is what we want -- but not at any price. In any case, we cannot build the plane under the conditions that we've had up to date.
SPIEGEL: Your company is also partly to blame for this development.
Enders: True. EADS should never have signed this contract. Our American competitors would never have accepted such conditions. We've made big mistakes, and errors have also been made on the customer side. We should now rectify these together.
SPIEGEL: What are your demands on the governments? More money? More time?
Enders: We submitted a few proposals back in December. This basically concerns three issues. First, the A400M should be technically and economically organized like any other defense project, where the risks and opportunities are appropriately shared by the customer and the industry. This means, for example, that Airbus will no longer carry the risks alone of engineering the engine, because that is neither our job nor did we want things this way. In all other military programs, the engines are also handled separately.
SPIEGEL: And second?
Enders: Engineering, flight tests and the start of production have to be optimized chronologically in order to minimize the risks of series production. And third, studies need to be conducted to assess whether the A400M, which is designed to be more or less an all-rounder, really has to be able to do everything right from the start. It could save everyone a great deal of time if some of the things this multi-talented aircraft is supposed to be able to do were only introduced step by step.
SPIEGEL: If no agreement can be reached, you will have to pay back billions of euros to your customers.
Enders: I assume that we'll find a solution with the governments. If not, then it would be a case of "better to make a painful break than to draw out the pain," as the Germans say. In any case, I'm not going to traipse off to Berlin or Paris to ask for a continuation of the program under conditions that are unacceptable for us. As the head of Airbus, I have to look at the whole picture. On the one hand, our business is threatened by the global economic crisis. On the other hand, I have capital-intensive programs and new developments like the A380 and the long-haul A350 plane. This means that we will face enormous financial and industrial challenges over the coming years, even without the A400M.
SPIEGEL: The tanker that you want to sell to the US government is something that you're not even mentioning any more.
Enders: Thank you for reminding me of that. The US tanker fleet is obsolete and needs to be replaced. We had the contract, but we lost it for political reasons. Our competitor is fighting with the gloves off. That was to be expected. But we'll be back for another round.
SPIEGEL: Nobody knows better than you that, in your business, political sensibilities often carry more weight than economic effectiveness. In view of the economic situation, it can hardly be expected that Washington would again ignore its own giant aircraft manufacturer Boeing and award a multi-billion-dollar contract to Europe.
Enders: We have the better product, outstanding partners and we want to build the planes in the US. Why shouldn't we be able to win?
SPIEGEL: To make matters worse, the World Trade Organization (WTO) now also has to mediate the dispute between the US and Europe over launch aid that Airbus also receives
Enders: ... and we, in contrast to Boeing, completely pay back. But this is a rather bizarre discussion that seems to come from another world and another time, when you consider the multi-billion-dollar programs that governments around the world have launched to bail out their banks and industries. And now repayable loans for Airbus supposedly distort international competition? That's ridiculous!
SPIEGEL: Rivalries and power struggles between the Germans and the French have also erupted time and again within your company.
Enders: That's your opinion.
SPIEGEL: You yourself have vehemently demanded an "end to the hate campaigns."
Enders: Things have improved considerably since certain animosities flared up once again last year, when there were warnings here in Toulouse against German domination. The younger generation of Airbus managers experiences integration from a totally different perspective. But I certainly wouldn't claim that the task of integration has already been completed.
SPIEGEL: As soon as something goes wrong at a plant somewhere, nationalist tensions flare up again.
Enders: Problems within the company can be a trigger. But this is usually brought into the firm from the outside. It's like extinct volcanoes. They can also erupt again someday. But as I said, integration is making good progress.
SPIEGEL: What is now the most French thing about you?
Enders: Perhaps my preference for French wine from the Toulouse region? But seriously, my job is not to be as French or German as possible, but to manage an international company -- a company, I might add, that will become significantly more Asian, and hopefully also American, over the next decade.
SPIEGEL: Your firm provides the parent company with roughly 60 percent of its sales volume. Isn't it about time to finally consolidate all the EADS headquarters -- in Ottobrunn near Munich, in Amsterdam and in Paris -- here in Toulouse and call the entire company Airbus?
Enders: Not a bad idea! Toulouse is also our largest location. But that's a decision for EADS.
SPIEGEL: Your father was a shepherd. Do you sometimes imagine how wonderful life would be if you were responsible for nothing more than a flock of sheep?
Enders: No. People often idealize the life of a shepherd, but it's very hard work. As children we had to lend a big hand around the farm, and vacations were rare. I also didn't have a talent for looking after sheep. But those were highly formative years that, in retrospect, I wouldn't have missed for the world.
SPIEGEL: Mr. Enders, thank you for this interview.