AIRBUS INDUSTRIE

A study and analysis

Group # 6

ANJALI MIRCHANDANI
DHRUVA ANURAG
PREETAM DAS
SANDEEP CHANDRA
SURBHI GUPTA
AMBATI GAUTAM

7A
16A
31A
43A
51A
56A

Contents
Brief Introduction ............................................................................................................................................. 3
Products and services offered and annual output ............................................................................................... 3
Global Presence................................................................................................................................................ 5
Number of plants and employees ...................................................................................................................... 6
Organization Structure...................................................................................................................................... 8
Organizational Control A Work in Progress to Decentralization .............................................................. 8
What triggered the change in the thought process? ..................................................................................... 9
R&D Wars.............................................................................................................................................. 11
SWOT Analysis ............................................................................................................................................. 14
Problems Faced By Airbus in Various Countries ............................................................................................. 15
Socio Cultural & Technical Issues ........................................................................................................... 15
Future Outlook (Business Expansion Plans) .................................................................................................... 17
Trend Analysis ....................................................................................................................................... 17
Summary and Learnings ................................................................................................................................. 19

Brief Introduction
Airbus is one of the worlds leading aircraft manufacturers whose customer focus, commercial knowhow, technological leadership and manufacturing efficiency have propelled it to the forefront of the
industry. The company operates in three divisions:
Airbus
Airbus Defence & Space
Airbus Helicopters
The Airbus division is engaged in the development, manufacturing, marketing, and sale of
commercial jet aircraft of approximately 100 seats; and regional turboprop aircraft and aircraft
components, as well as provides aircraft conversion and related services.
The Airbus Defence & Space division is involved in the development, manufacturing,
marketing, and sale of military transport aircraft and special mission aircraft and related services;
missiles systems, military combat aircraft and training aircraft; and satellites, orbital infrastructures
and launchers. This division also provides defence electronics and global security market solutions,
such as integrated systems for global border security and secure communications solutions and
logistics; training, testing, engineering and other related services; and space related services.
The Airbus Helicopters is engaged in the development, manufacturing, marketing, and sale
of civil and military helicopters; and provision of helicopter related services.

Products and services offered and annual output

AIRBUS' MODERN AND COMPREHENSIVE PRODUCT LINE

MILITARY AIRCRAFT

CORPORATE
AIRCRAFT

PASSENGER
AIRCRAFT

FREIGHTER
AIRCRAFT

SERVICES OFFERED

Airbus delivers customized outsourcing solutions for maintenance to meet the unique business
model of each airline.
Airbus Flight Hour Services (FHS) consists of guaranteed solutions ranging from component supply
and repair to full airframe maintenance.
Expertise, quality, flexibility and cost-efficiency are cornerstones of the Airbus Flight Hour Services
offer, built on different packages:
Flight Hour Services components
The module guarantees the availability of all primary line replaceable unit spare parts through an
exclusive on-site stocks and pool access services, as well as state-of-the-art repair services.
Flight Hour Services Tailored Support Package
The Tailored Support Package (TSP) is a modular and flexible solution which combines the Flight
Hour Services components module with a combination of engineering, airframe maintenance and
additional services

More than 120 aircraft consisting of A320, A330, A340 and A380 family jetliners are covered by
Flight Hour Services as of 2013, showing the attractiveness of Airbus offer for its worldwide
operators.
ANNUAL OUTPUT
A300/A310

Single aisle

A330/A340/A350

A380

Total

Output Metric
Total orders

816

10925

2461

318

14520

Total deliveries

816

6171

1483

138

8608

Aircraft in operation

392

5944

1438

138

7912

Global Presence
Airbus is a truly global company with strong European roots, headquartered in Toulouse, France.
The four main industrialized nations to which it owes its existence, France, Germany, Spain and the
UK, have allowed Airbus to draw on the best that Europe has to offer and expand into an
international company that responds to the needs of its worldwide operator base with modern and
efficient aircraft, backed by high-quality services, training and support.
With an active workforce of 61,000 around the world, Airbus is expanding fast.
It has fully owned subsidiaries in United States, China, Japan, India and the Middle East, and spare
parts centers in Hamburg, Frankfurt, Washington DC, Dubai, Beijing and Singapore, training centers
in Toulouse, Miami, Hamburg and Beijing and more than 150 field service offices around the world.
It also has a network of around 2000 suppliers in 20 countries.
A glimpse at how Airbus has expanded its wholly owned subsidiaries:
INDIA
Airbus footprint in the fast-growing Indian aerospace sector is coordinated through the companys
fully-owned Airbus India subsidiary, which was formally announced in March 2014.
Airbus industrial cooperation with India began in 1988 when an agreement was reached with
Hindustan Aeronautics Limited (HAL) to manufacture passenger doors for the A320 aircraft. As of
March 2014, HAL produces half of all A320 forward passenger doors.
JAPAN
Airbus initially entered the Japanese market in 1979 when Japan Air Systems (JAS, now merged with
Japan Airlines) ordered a fleet of six A300B2s. These were the first widebody jets to be acquired by
the carrier, and were used to meet demand on domestic routes as well as to develop regional
operations.
Airbus also has fostered strong industrial partnerships in Japan for all of its current production
aircraft.
CHINA
It is a major geographical region for Airbus, with Chinese deliveries representing 20 per cent of the
companys global production as of late 2013.
The country also is home to a growing number of Airbus manufacturing and support operations
including its first assembly line outside of Europe.

Number of plants and employees

Airbus Group has become the most international aerospace and Defence Company in the world.
Rooted in their 4 core European countries France, Germany, Spain and the UK their footprint
has been growing constantly, with an industrial presence that now spans the globe. From the US to
China and the Middle East, their diverse nature allows for a broad range of skills, ideas and cultures
to be integrated under one roof.

Let us individually look at the Global Presence of Airbus in the countries mentioned:
GERMANY:
The strong roots of the Airbus Group in Germany provide important impetus for growth and
competitiveness, for both the Group and for Germany as an industrial location. In 2013, Airbus
Group worked with nearly 17,000 external suppliers in Germany and bought goods and services
worth 6.3 billion, while achieving a turnover of around 4.5 billion with German customers.
Airbus Group employs over 50,000 people across its 33 sites in Germany, representing close to half
of the countrys aerospace workforce.
FRANCE:
Airbus Group exports over 20 billion of aeronautical and space products from France each year,
placing 12 billion of orders with 9,300 French industrial partners annually. The talent and skills of
the Groups 54,500 employees in France form the bedrock of its global competitiveness.
UNITED KINGDOM:
The UK is one of Airbus Groups four home markets. Building on a proud 100-year British heritage
and with a 17,000-strong workforce, the Company is firmly rooted in the UKs advanced technology
industrial base.
CHINA:
Growth and evolvement have been a constant in the history of Airbus in China since 1994, when
the company officially established in the country. Airbus opened its first assembly line outside
Europe in Tianjin in 2008, and the company has expanded its in-service fleet by 50 times in less
than 2 decades. In December 2013, the company delivered its 1,000th aircraft and aims to reach
2,000 by 2020, pushing its market share above 50%.
UNITED STATES OF AMERICA:
As a leading supplier and industrial partner in defence and homeland security, Airbus Group, Inc.
and its parent company, Airbus Group, contribute more than $14.4 billion to the US economy
annually, supporting over 245,000 American jobs across approximately 40 states. Since its creation
in 2002, Airbus Defence and Space, Inc. (formerly EADS North America) has been selected in key
competitions for military aircraft and systems.
SPAIN:
Airbus Group is the leader of Spains aerospace and defence sector generating 64% of the nations
revenues from this area of the economy. It has also been the industrys key entrance point to
European aerospace programmes.

Organization Structure

Competitors (Companys position)

Airbus is in tight competition with Boeing every year for aircraft orders although Airbus has secured
over 50% of aircraft orders in the decade since 2003.
Airbus won a greater share of orders in 2003 and 2004. In 2005, Airbus achieved 1111 (1055 net)
orders, compared to 1029 (net of 1002) for the same year at rival Boeing. However, Boeing won 55%
of 2005 orders proportioned by value; and in the following year Boeing won more orders by both
measures. Airbus in 2006 achieved its second best year ever in its entire 35-year history in terms of
the number of orders it received, 824, second only to the previous year. In August 2010, Airbus
announced that it was increasing production of A320 airliners, to reach 40 per month by 2012, at a
time when Boeing is increasing monthly 737 production from 31.5 to 35 per month.

Organizational Control A Work in Progress to Decentralization

The roots of the Airbus organizational structure could best be understood from a historical
point of view. Airbus is a joint venture between the German and the French governments in 1970 in
a bid to counter their US competitor, Boeing. There has thus been a power struggle between the
countries, about who would lead the organization, and whose voice carries more weight.
The company decided to do away with its dual CEO way of functioning in 2007, after many
issues concerning the smooth functioning of the organization. The organization was basically bogged
by slow decision making on account of the dual leadership positions at each level.

As regards the stance on centralized decision making, Airbus has been making efforts to work
toward decentralization in the recent past, with a new CEO at its helm. The CEO, Mr. Fabrice Bregier,
took over in the 2012, and has had past experience
After years of top-down reforms to fix poor coordination that once reduced Airbus to
disarray, Bregier has ushered in decentralization since becoming chief executive in June, 2012. The
prize, should the shift be successful, seems lucrative Airbus could potentially help multiply Airbus
profit margins five-fold and keep up with strong demand for its airliners from Asia; the management
thoughts are on the lines of how the organization would basically gain from working as smaller
business units.
The price of decentralizing could come at a cost, however this is an industry where tiny
errors could potentially cost billions, as investors and airlines learned to their cost when
coordination broke down on the A380 superjumbo or Boeing lost control of the supply chain for its
787 Dreamliner. However, with an organization size of 60,000, Airbus has become too big to run
from the center as Bregier aims to lift profit margins to 10 percent by 2015 from a meagre 1.8
percent in 2011.

What triggered the change in the thought process?

There have been political issues bogging the organization down for more than just a while.
At the time Bregier joined Airbus as operations chief in 2006 after running sister company
Eurocopter, Airbus was mired in internal issues and Franco-German industrial relations were at a low
point.
The crisis, which cost the company billions of dollars and brought down three CEOs, was
traced to a simple decision by engineers in Toulouse and in the German city of Hamburg to use
different versions of the same digital design software, which resulted in cables being millimeters
short when sections of A380 superjumbos were delivered for assembly, setting the prestigious
project back by years. The looming crisis resulted in massive job cuts and alarms blaring on potential
profit warnings.
It was then that power was centralized and "transversal" teams created in a drive for ever
deeper integration between staff in France, Germany, Britain and Spain. Bergier, believes that Airbus
has now touched the limits of centralization, with Airbus expanding outside Europe with plants in
China and, soon, the United States.
As of 2013, the transition was not yet complete, and there were questions being raised increasingly,
if the management had been too top-down.

Airbus and Boeing World Market Share: 2013

Regarding operational aircraft, there were 7,264 Airbus aircraft operational at April 2013. Although
Airbus secured over 50% of aircraft orders in the decade since 2003, the number of Boeing aircraft
still in operation at April 2013 still exceeded Airbus by 21% because Airbus made a late entry into the
market, 1972 vs. 1958 for Boeing; this lead is diminishing as older aircraft are progressively retired.
Though both manufacturers have a broad product range in various segments from singleaisle to wide-body, their aircraft do not always compete head-to-head. Instead they respond with
models slightly smaller or bigger than the other in order to plug any holes in demand and achieve a
better edge. The A380, for example, is designed to be larger than the 747. The A350XWB competes
with the high end of the 787 and the low end of the 777. The A320 is bigger than the 737-700 but
smaller than the 737800. The A321 is bigger than the 737900 but smaller than the previous 757200. Airlines see this as a benefit since they get a more complete product range from 100 seats to
500 seats than if both companies offered identical aircraft.
Net Passenger and Freighter Wide Body Orders Since 2008

Rivalry between Airbus and Boeing

For the past twenty years, the skies have seen huge jet airliners from only two companies; Boeing
and Airbus. It is unlikely any other competition will take off to challenge these two anytime soon. For
the meantime, their intense rivalry can almost be likened to two dog fighting planes, each one just
waiting for the right opportunity to shoot the other down and gain dominance of the skies.

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Their rivalry does not end with plane design and delivery; the companies are constantly trying to one
up each other in technology and price. They have also come before the World Trade Organization to
accuse the other of receiving state funding from their respective governments.
Wide Body Sales 2013: Net Passenger and Freighter Wide Body Orders

R&D Wars
With Boeing already at a head start in the passenger airline industry, Airbus had to offer airlines
something better. It eventually came up with fly-by-wire technology, where the manual flight
controls of a plane are replaced with an electronic interface. This technology enabled the addition of
a computer that could automatically adjust to stabilize the aircraft even without input from the pilot.
Airbus was also the first to use composite materials in their planes, making them lighter, although
Boeing would later up the ante, using composite materials for 50 percent of its 787 Dreamliner.
Airbus is now working on fitting composite materials in at least 53 percent of its planes.
Each company used engines from varied developers before settling on a favoured manufacturer.
Since their 737-300 series, Boeing has favoured General Electronics while Airbus has stuck with RollsRoyce since the A340-500.

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2014 Gross Market Share

2013 Market Share by Category Net

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2014 Net Market Share

Airbus A380 vs. the Boeing 747

The two rival planes are not so dissimilar when it comes to dimensions. The A380 is 8.4 meters high
and 7.15 meters wide while the 747 is 7.81 meters high and 6.5 meters wide.
Each company claims the better plane. Airbus says the A380 consumes eight percent less fuel per
passenger compared to the 747 and needs 17 percent less runway for takeoff and landing. The A380
is also touted to have a cabin floor space of 478 square meters, almost half more than the 747-8.
However, Boeing claims the 747-8 is over 10 percent lighter per seat and saves 11 percent in fuel
consumption per passenger. They also said their plane has a trip-cost reduction of 21 percent and a
seat-mile cost reduction of more than six percent.

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SWOT Analysis
Internal Factors
Strengths

Strong internal support system, making it easier for communication amongst the offices
within Airbus
Diversified customer base with planes being used by many different airlines around the
world
Brand Recognition: Airbus is one of the top 2 aircraft manufacturers in the world
Innovative aircraft design
Reach across all of Europe
High investment on R&D
Loyal customers
Market share leadership
Strong management team
Robust supply chain
Low labour cost global footprint

Weaknesses
Problems associated with the new A380 engines
Diseconomies to scale
Proper organizational control still not in place: the organization is in the process of
decentralizing its units, and is lagging behind majorly on efficiency
Over leveraged financial position
Opportunities
Large, increasing demand for their Aircraft from companies around the world
Surge in defence spending in China and India that would lead to growth in their different
market segments
Rise of the low cost airlines
With more sales and a higher cash flow, it will lead to growth through acquisition
possibilities
Product and services expansion
Threats
Competition from Boeing which is currently operating at much higher efficiencies, and has a
profit margin of ~10%, whereas Airbus profit margin is under 5%
Macroeconomic factors such as economic slowdown, exchange rate fluctuations etc.
Lower cost competitors or imports
The possibility of price wars
Maturing categories, products, or services

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Problems Faced By Airbus in Various Countries

In the case of a firm manufacturing aircrafts, entering foreign markets is something that is a given.
Its a foregone conclusion. Unless there is an entry in foreign markets, the scope for revenue, much
less profit becomes minuscule. The airlines market is rife with plenty of competitors, and the
manufacturers are lesser compared to other industries. With entry into any foreign market,
irrespective of the best of intentions, there are always barriers, be it socio cultural, economic,
economic patriotism or technical issues.
With respect to this particular assignment and case, we shall look at only the following and further
focus on the German-French dynamic of:

Socio Cultural & Technical Issues

The workforce at the aircraft manufacturer is geographically distributed in proportion to

national ownership stakes. In an instance of economic nationalism, government distort
private transactions among economic actors by discriminating against foreigners in the
name of national interest. This lead to decrease in the production efficiency. It is because of
the various differences of management styles and way of communication. For e.g.:
Compared to the French, the Germans prefer collective decision making, whereas the
French prefer centralised decision making. At the same time the Spanish are flexible but
have an inferiority complex, so they have tendencies to be vague and unreliable due to
which they respond very less. (Ian Stokes, 2006).

The main problem is when EADS concern of Airbus was created, two chief executives, one
German and the other, French headed it. It was maintained even due to knowing the fact of
the crisis caused by problems in development in A380 began. From the Hofstedes cultural
dimensions concept, the French like high power distance whereas the Germans prefer low
power distance.

So while making decisions Germans tend to give their input WHILE the decision process is
on. This was not looked kindly upon by the French. So this unintentionally hurt the egos of
the French people and creates a conflict between them. (Hofstede. G, 1991)

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Due to the government involvement respective countries, cost cutting measures were
delayed as state aid came to rescue their respective partner first. From this situation it
seemed that power was distributed unequally. The government was being self centred and
looked after its own end. No action was being taken by the group members of the company
in order to tackle the issue. It was in this area that a culture shows the extent to which it
tolerates and fosters pecking orders, and how actively members try to reduce them'.
(Mead, 1994; 66) 1

One of the main causes in delay of the launch of Airbus A380 for two years was owing to the
fact of having a complex wiring design system for it. There were 1,200 functions to control
the plane that takes 98,000 wires & 40,000 connectors. The system has 500,000 models,
which needs to be kept in sync from different countries. It was complicated and very time
consuming due the fact of the engineers being at different locations.

Even the aircraft parts were built at different locations. For example: nose sections were
built in France, fuselages in Germany, wings in Great Britain and tails in Spain. And the final
assembly were done in Toulouse (France). It unnecessarily increased the transportation
cost, communication problems and foremost aspect time consumption.

There was a problem with regards to software and knowledge as well. The engineers in
Germany and Spain used the older version V4 of the CAD program in order to design the
wiring system, while the engineers in France and England used the newer version V5. This
created trouble and delay while transferring the data because the some data was lost while
transferring files from one system to another.

With regards to knowledge, the French were familiar with the software while the Germans
were not inexperienced compared to French. According to Hofstedes1 it seemed that the
French were more of individualistic in nature because they were least concerned about the
training of their partner company. Due to the lack of integration in engineering there was
failure in execution.

When the HRM team was most needed to train the employees & communicate between
them regarding the software problems, they were busy responding to the new legislationsuch as those concerned with labour working hours and the French directive on rights of
individuals to choose their own training.
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As the French tended more toward individualism because of the preference towards
centralised executive order structure, they would first sort out their problems that made
them busy in sorting out issues that werent as important as compared to the training
problem. (Ian Stokes, 2006) 1; (Trompenaars, 1993; 8-11) 1

The top managers were busy struggling for the senior position in the consortium and
lobbying for influence. These lead political goals get in the way of project goals.

From this it seemed that that the top managers were very individualistic in nature. They
were more interested in getting the name and enjoy the perks of being an executive in the
organization. They seemed to be self-achievement oriented and least concerned about the
problems going on in the company. This dispersed the decision making power which was
most needed in problems like this. (Hofstede, 1991)

Future Outlook (Business Expansion Plans)

Airbus forecasts its businesses to grow at the levels tabulated below:

TOTAL AIRCRAFT DELIVERABLES: 29,226

MARKET VALUE: 4.4 TRILLION USD
The figures above clearly indicate the optimistic view the company has towards its future. Airbuss
positive outlook is because of the following factors, which it considered:

Trend Analysis

Consumer and Travel Surveys indicate the industry is likely to grow in the projected years
Government deregulation/liberalization will allow the industry to expand at a rapid rate.

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Airbus observes that the World GDP is being consistently outperformed by the World Passenger
Traffic rate, and believes that with further developments, this number is likely to increase.

Airbus also believes that the Asia-Pacific and the Emerging markets are the new hubs of
travel and will see astonishing growth in the coming decade. Hence, Airbus has elaborate
development plans for the region.

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KEY TAKEAWAYS

Strong growth in passenger traffic resilient growth through a difficult, but improving
economic period
Demand for over 29,000 new aircraft by 2032 ~28,300 passenger aircraft and nearly 900
freighter aircraft
Replacement of ageing fleets 20 year demand for nearly 11,000 passenger aircraft for
replacement, largely in the single-aisle segment
Single-aisle aircraft represent 70% of demand in units, but wide-body aircraft represent 60%
of value

Summary and Learnings

In the real world there is no single specific way to integrate diverse cultures within an international
joint venture. It solely depends upon the situation and the kind of cultures involves. But there must
be an attempt to be closer to individual's perception and actions that may lead to a common ground
where everyone accepts each other.
There are a few ways to do that, we cover some of those.

Research: Proper research needs to done before setting up such a culturally diversified
company. Research should be on the basis of the cultural dimension of Hofstedes1 i.e.
power distance, uncertainty avoidance, masculine vs. feminine, short-term vs. long-term
orientation, what they like and what they don't. It helps them to integrate all their activities
on the common grounds and come up with a solution that maybe acceptable to everyone.

Collectivist's approach: As we don't have any idea about what people's want and desires are,
a collectivists approach will explore the ideas and perceptions about each other. It will
gradually help to know each other's ideas and beliefs that can be helpful to achieve the
desired goals and objectives. Initially it may create problems but at the later stage when
everybody has been known to each other it help people or employees to understand
regarding what to do and what not to do.

Diffuse relationships: The company employees need to be considered as members of a

group or an organization. They should be involved decision-making process. It helps the
employees to build rapport between themselves that in turn explore each other's ideas and
beliefs. Their relationships with each other helps us to find how efficient the organization is
and what steps need to be taken in order to tackle the cross-cultural issues. Teambuilding
session should be conducted in order to create a feeling of oneness, which can increase the
efficiency of a company.

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Equality: If we integrate diverse cultures within international joint venture equality should
be always there in term development, technological advancement, knowledge, etc. in the
Airbus it failed because Germany & Spain had V4 version of the Cad programme whereas
France & England had the latest V5 version. So always proper standardisation should be
adopted within the whole organization at a specific time.

Global knowledge, local understanding: This is an approach should be to indulge diverse

cultures but the process should be local. It is colloquially referred to as think global, act
local, it means, any activity done should be on the basis of the activity carries out in the
home country of any organisation. Proper training should be given to its employees from the
engineers at headquarters because they know it better than anyone else. This helps them to
consume less time and achieve perfection, stabilisation, which is considered to be vital in
any industry in order to achieve goals and objectives. Training can even be of language, way
of doing things, actions, etc. Due to lack of proper training the Germans were not familiar
with the software; it more delayed the project while executing the fuselages.

Time focus (polychromic): Initially the top managers need to be polychromic in time i.e. the
top managers need to focus on several tasks & should be less dependent on detailed
information while doing these tasks. Their main focus should be on involvement with
people. This helps the employees or the partners in business to be much more expressive
and approach the management whenever they feel to do so. (Hall & hall, 1990).

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