From the Magazine
Trying To Untangle Wires
With its new superplane badly delayed, Airbus scrambles to keep up with Boeing

Sunday, Oct. 08, 2006
The short circuit at Airbus has turned out to be much more serious than expected. For several months, officials at the giant aerospace company have explained away the delays dogging their biggest project, the €12 billion superjumbo A380 plane, by blaming the wiring. Each A380 has about 500 km of electrical cables that need to be configured individually for different customers (so the explanation went), and that was proving far more complex than anticipated.

Last week, the story changed. Airbus postponed the A380's launch once again, but acknowledged that the company's problems are far greater than mere technical snafus. The two-year delay to the A380 will reduce profits by an estimated €4.8 billion over the next three years and cut free cash flow by €6.3 billion. Airbus and its parent company, EADS, do indeed have a wiring problem — but it's one that has afflicted the companies' management structure as much as the guts of the planes themselves.

Airbus, a four-nation consortium backed by millions of euros of taxpayers' money, was once hailed as a model of European industrial cooperation. In fact, its structure, which distributes management and blue-collar jobs among its various state and private owners, has turned Airbus into a nightmare of corporate governance. It has become an enterprise in which political considerations carry more weight than commercial ones, where horse-trading trumps industrial efficiency, and where the national interests of its partners are balanced so carefully that many operations are needlessly duplicated. "It's very hard for Airbus to free itself from political strangulation," says Ulrich Horstmann, aerospace analyst at Munich, Germany-based Bayerische Landesbank
 
the rest at Time
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