Intrigue Of Shakespearean Proportions Unfolds In Airbus’ Top Echelon
Airbus is beset by corruption probes, internal turmoil and ongoing production issues
Whether in Toulouse or Hamburg, signs are rife that things are not running smoothly at Airbus these days. Some 40 A320neos are parked at each of those Airbus facilities, all awaiting engines. The scene is reminiscent of photographs from 1969 of the apron at Boeing’s Everett, Washington, plant full of 747scoincidentally, like the Neos, also awaiting modified Pratt & Whitney engines. Delivery targets for 2017 are at risk, so there is work to do.
If Airbus executives are right, the situation is temporary and will be overcome fairly soon; at the latest, sometime next year. But there is a pervasive sense of things going wrong that transcends production woes. Power struggles that encompass egos and turf battles are making a surprise comeback.
Here is a quick recap of significant events this year that helped pave the way to the current climate. Former CEO of commercial aircraft, Fabrice Bregier, was stripped of that title; Group CEO Tom Enders claimed that role and its responsibilities for himself. The important sales division, headed by John Leahy, also reports to Enders as of earlier this year.
Over the past few weeks, other issues at Airbus began to surface. German magazine Der Spiegel published a series of articles about alleged systematic corruption and improper use of agents in past commercial aircraft sales campaigns. It asserted that Enders did not react quickly enough and questioned whether he can survive the scandal.
This was followed by a report in another publication, business daily Handelsblatt, that the French government is seeking to gain back control of Airbus, in part by appointing new board members and revamping the governance that was introduced in 2013. At that time, both Germany and France reduced their stakes in what was then EADS and essentially relinquished direct influence on running the company.
And finally, the latest reports contend that Bregier, in an effort to regain his CEO position, is behind a campaign to get Enders fired.
What is happening in Toulouse these days could be as compelling as a Shakespearean drama if it did not have serious ramifications. It underscores that vastly different camps still exist within Airbus and that those camps do not trust each other. Leaked “information” about alleged intrigues makes matters far worse.
Enders’ move to demote Bregier was probably a mistake because demoting the successful Airbus Commercial CEO created unnecessary disruption, although each man publicly defends the decision. Enders was already clearly the top man before the changes and had his own successes, mainly by transforming the corporate governance and reducing government influence, which is reflected in a much higher stock price. Bregier is not only a capable manager, he is also politically savvy, so it is hard to believe that he himself could be behind a campaign against his boss.
And as to the governance question: Even if the French government truly wanted to regain control of Airbus, it would be an extremely hard task. It would require a majority vote of the company’s mainly private shareholders—but why would they give up power? Alternatively, France could buy a majority stake in Airbus. This, too, is an unlikely scenario, not least because of the current market capitalization; such a step would be prohibitively expensive.
Nothing will happen in the short term while Germany is in search of a new coalition government, a process that could take many more weeks. Also, French President Emanuel Macron negotiated the Airbus governance changes on behalf of former President Francois Hollande—why would he want to revert to the old status now?
Whoever prevails at Airbus will not be determined by Enders or Bregier—or even by Macron. The company is subject to investigations into alleged corruption in the UK and France, and possibly Germany, and the U.S. will open its own proceedings in the near future. Whatever wrongdoings or lack of proper oversight emerges will determine whether Enders can stay on beyond his current term, which ends in 2019, and what the future holds for Bregier.
More important in the short run are those A320neos parked in Toulouse and Hamburg. Airbus needs to get them off its airfields before year-end to reach its target of delivering close to 200 Neos this year. All require management attention.
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