A400M: The Horror, The Horror

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Multinational defense programs in the West have become “a horror” for industry, and Airbus Group CEO Tom Enders said April 30 that he will not allow his company to repeat the experience of the beleaguered A400M in his tenure.

“I am determined, at least for my company, not to ever again walk into such a program, and rather to resist [that kind of] contracting and say, ‘no, we’re not going there,’” Enders said as part of a speech at the Atlantic Council in Washington. “That hardly ever works. Industry has a lot of egg on the face, we’re losing lots of money and that should not happen again.”

Enders also noted the tri-nation Medium-Extended Air Defense System, led by Lockheed Martin but including MBDA, of which Airbus has ownership. “The only system on the planet that can handle and shoot down missiles that come from completely different trajectories,” he said, “and the U.S. walks out of it.”

The German-born CEO, nonetheless, focused his criticism on his home continent. The European defense industry, for instance, is besieged by “too many national interests, too much overlap and certainly too much waste,” as well as the tendency for parochially driven demands on industrial involvement.

“These practices certainly do not result in what the Americans call a healthy industrial base,” Enders said. “By the way, I’ve never heard that in Europe, somebody speaking about a healthy industrial base, because that means an industry that should be allowed to make decent profits and should be incentivized to be in this field of business.” But that is a “rather difficult notion in Europe,” where defense is seen as a “dirty” business.

Above all, Enders said, fragmentation in government leadership stemming from the confederate organization of European nations hobbles the success of joint defense programs, despite the necessity for nations to team up to pursue them because of low defense spending levels. “I gather that these practices, ladies and gentlemen, have cost each the European taxpayer, but also industry in the last decade alone billions and billions of euros,” he told the trans-Atlantic think tank audience.

“In general, industry should have much more say in how we do the [multinational] project,” he concluded. “The requirements are defined by the military, but the authority for execution should be much more on the industrial side. So far all we have reached at best is sort of a half-half situation, and that almost always ends in disappointment.”

Still, cooperation is being attempted. Enders praised budding U.K. and French defense program agreements and moves by nine E.U countries and Norway to work toward aerial refueling tanker aircraft. Moreover, on the commercial side of aerospace, to which Airbus is 80% focused, there is great cooperation and reciprocity in government aircraft certification, for example.

But queried how far commercial ties could go internationally, and the Airbus chief was quick to quash an alliance with arch-rival Boeing. “We have not given any thought to a joint venture between Boeing and Airbus simply because it’s completely unrealistic,” he said. “I don’t think our customers would appreciate that to start with nor the regulatory authorities because over a large spectrum… we have a duopoly today.”

Likewise, in the defense sector, trans-Atlantic opportunities for Airbus start with the fact that the U.S. far and away is the world’s largest aerospace and defense marketplace. “I mean, we are here because this is simply a market too large to ignore,” Enders said in response to a question from Aviation Week. “The U.S. still sets the standards on the commercial side and certainly on the military and space side.” While not ruled out, mergers and acquisitions in America are not the company’s main focus. “We are building on the businesses that we have,” he said, pointing to military helicopters like the LUH-72 and airliner manufacturing.

“I’m very happy with the U.S. business we have,” Enders said. “And let’s not forget we’re building a huge footprint in commercial, in Alabama, and that is because the U.S. is the premier market in single-aisle aircraft, and from there we will see how we will proceed.”

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on Jul 17, 2014

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