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Whatever else, Airbus cannot be accused of failing to put on a brave face at this week’s Paris Air Show, held every two years. Louis Gallois is the troubled European airframe-maker’s third chief executive within 12 months. But still he declared: “I can tell you with full confidence that Airbus is back and fully back.” Supporting his confident public message was an extraordinary flow of orders and commitments for over 600 aircraft accumulated in time for the show by the firm’s super-salesman, John Leahy.
Although it is heading for a second successive loss—last year it plunged 572m ($718m) into the red—Airbus is undoubtedly in better shape than it was 12 months ago when wiring problems delayed the A380 and the weak dollar exposed the firm’s bloated cost base. It has begun the “Power8” recovery plan, intended to save 2 billion annually by cutting 10,000 jobs and auctioning off six factories to partners. And the giant A380 will begin commercial service with Singapore Airlines in the autumn, although being two years late.
In the contest between the twin-engined wide-body Boeing 787 and the A350 XWB, Mr Gallois struggles to be as positive. The 787 is already a sales phenomenon, with over 630 firm orders even before the plane’s roll-out next month. The airlines are excited by its revolutionary use of a composite material called carbon-reinforced plastic (CRP). Five years behind the 787, which will enter service next year, the A350 contains a similar share of composite material, but is based on a less advanced structural design that involves hanging CRP panels on a titanium frame. Boeing acknowledges that the A350 may be as light as the 787, but argues that it will be a less pleasant plane to fly in and a more difficult one to maintain.
Mr Gallois admits that following Boeing’s approach would have been too expensive and risky for Airbus. At the same time Mr Gallois bemoaned the advantage his rival has in government-supported research and development. Boeing, he claims, receives about $800m a year—ten times as much as Airbus. Earlier in the week, during meetings with ministers representing the four Airbus partners (France, Germany, Britain and Spain), he asked them to fund half the company’s planned 600m-a-year investment in research and technology. He is not hopeful.
But for the moment what matters most for Airbus is that the market stays strong and that it gets to grips with its costs. This may require going further in imitating Boeing’s risk-sharing partner (RSP) model than Airbus seems willing to contemplate. According to some estimates, about 80% of the work on the 787 is outsourced to RSPs, saving Boeing both precious development time and working capital.
What this week has shown is that for all the success of the 787 and the mistakes of Airbus, the competitive duopoly of the past decade is still firmly in place. But will things stay that way? That depends partly on whether Airbus really has learnt its lessons and partly on who else wants to get into the game. Boeing reckons that in 20 years, 36% of the market will be in the Asia-Pacific region. For the time being, the Chinese, the Indians and others are happy to be partners and customers. But that could change.
1. How can Louis Gallois be confident that Airbus is “fully back”?
A) Because under his leadership there is a sign that the company will soon stop losing money.
B) Because Airbus put on a good show in Paris in which it received a large number of orders.
C) Because Airbus launches its recovery plan that would surely bring a great amount of profit.
D) Because the company is in better situation as it succeeded in slowing down the annual loss.
2. How does Boeing feel about the coming A350 by Airbus?
A) Critical.
B) Indifferent.
C) Optimistic.
D) Supportive.
3. According to Mr Gallois, how can Airbus catch up with Boeing?
A) By mastering advanced technology that can compete with or excel Boeing.
B) By receiving more financial and other kinds of support from the partner governments.
C) By adopting the RSP model so as to cut costs and improve the efficiency of its working process.
D) By reducing cost through its recovery plan and relevant policies.
4. What is Boeing’s strategy of cutting cost?
A) It outsources a large portion of work to its partners.
B) It invests in technology research and development.
C) It receives much support from the government.
D) It expands production by looking for more orders.
5. By “But will things stay that way?” (Line 2, Paragraph 6), the author means _______.
A) Airbus might make more mistakes
B) the markets in Asia-Pacific region might shrink
C) the competitive duopoly by Boeing and Airbus might change
D) Chinese and Indians might become the two companies’ strong competitors