Airbus wonder proves to be a tactical blunder

CAPE TOWN — The saying "go big or go home," was never less appropriate than in the case of Airbus's A380 superjumbo, production models of which are now on the scrapheap. Grounded by a combination of executive political ambition to outdo Boeing's 747 Jumbo competition (and the enthusiastic reception at the initial air shows was deceptively affirming), plus clashing emerging technologies, the project went sideways. With less than half of the 750 massive planes being sold at a production cost of $17bn, the 550 seater was quickly superseded by Boeing's smaller, hyper-efficient twin-engine 787 Dreamliner. Once again, proof that pulling the joy stick all the way back against a flying ace requires a good parachute close to hand. Airbus Chief Executive Tom Enders admitted they were probably "at least 10 years too late," having gambled on marketing conditions persisting. Such volatility reminds us South Africans that, besides Sieners and Sangomas, nowhere can anyone accurately predict the future, let alone safely take bets on it. – Chris Bateman.How Airbus's A380 Went From Wonder to Blunder.By Robert Wall and Daniel Michaels.___STEADY_PAYWALL___.(The Wall Street Journal) – When Airbus SE EADSY +0.65% launched the A380 superjumbo in 2000, it touted the two-deck plane as "the Eighth Wonder of the World." Instead, the world's largest passenger plane exposed dysfunction inside the European aerospace company and now offers a textbook case of a company misjudging its market and losing big.Airbus has sunk at least $17bn into the project yet sold fewer than half of the 750 superjumbo jetliners it promised to deliver by the end of this year. On Thursday Airbus said it would cease producing the 555-seat plane at the end of 2021.By then, Airbus expects to have sold 251 A380s – one more than its original break-even target, set before production delays added billions of dollars in costs. At its peak, A380 deliveries never reached 5% of annual Airbus deliveries – less than half its target.How did some of the world's best engineers get their numbers so wrong? Airbus misjudged market trends and underestimated emerging technologies. It compounded the error by justifying its decision with emotion and European pride, some former Airbus officials have said. Then its production system, organised for politics more than efficiency, failed.Steven Udvar-Házy, a pioneer of aircraft-leasing who was early both to order the A380 and terminate his planned purchase, said the plane was inspired largely by political ambition to outdo Boeing Co.'s 747 jumbo jet as the world's largest airliner."The technological achievement was formidable," he said, but the A380's "commercial viability was always dubious."All jetliners are expensive bets on technology, engineering and market trends. When Boeing's 747 first flew in 1969, it was triple the size of any other plane in the air and for several years its success was uncertain. Europeans in the 1960s wagered on the government-funded supersonic Concorde, an aviation marvel that flopped because of high operating cost and house-rattling noise.Airliners typically fly for a generation, but the first A380s are already parked after only about a decade and being sold for scrap. Boeing's jumbo jet could still be in production – though barely – when Airbus mothballs its A380 factories."We were probably at least 10 years too late," Airbus Chief Executive Tom Enders said in announcing the A380 cancellation.With the A380, Airbus planners bet prevailing market conditions would persist. They assumed airlines would keep using big, increasingly congested hub airports to transfer passengers between connecting flights, and need to fly large, four-engine jetliners on very long routes. Both changed around the time A380s started flying.Not long after Airbus began developing the A380, Boeing in 2003 embarked on its smaller, hyper-efficient twin-engine 787 Dreamliner. It quickly became a best seller. Only in 2006 did Airbus respond with a big two-engine model, the A350. Together, the twins rewrote the economics of long-haul flying, hurting the A380..'We were probably at least 10 years too late,' Airbus Chief Executive Tom Enders said in announcing the A380 cancellation. PHOTO: JASPER JUINEN/BLOOMBERG NEWSThe technology change coincided with shifts in airline boardrooms. Whipsawed by traffic-crushing crises and soaring fuel prices, airline executives in the 2000s focused increasingly on costs and investor returns. Profit took precedence over market share. Big planes that could be tough to fill profitably fell from favoor. No US carrier bought the A380. The biggest European buyer, Germany's Deutsche Lufthansa AG , took only 14.Airbus officials offered many reasons for the order dearth, including production problems and the financial crisis. Yet they insisted airport congestion would snarl growth that only the A380 could revive. In 2015, after another order drought, Fabrice Brégier, then-Airbus Commercial Plane president, said the A380 was simply ahead of its time.The A380 might have built more momentum if not for production debacles. Around the time of the first test flight in 2005, Airbus realised it had underestimated the complexity of wiring the superjumbo. Managers discovered that French and German designers had used incompatible software.The snafu exposed deep cultural rifts inside the plane maker, which was led by French and German co-CEOs – a structure designed to appease government shareholders. In 2006, during the depth of the A380 crisis, Airbus ousted senior French and German executives. The next year it abandoned the co-CEO structure altogether.More setbacks followed. The engine of an A380 blew up during a passenger flight in 2010. Nobody was hurt, but it drew negative attention to the plane. Wing cracks discovered on many A380s led to costly repairs.Customers, including Richard Branson's Virgin Atlantic Airways Ltd., Air France-KLM SA and Qantas Airways Ltd., canceled orders.Airbus stumbled into its production fiasco because of overconfidence in its own abilities, company veterans said later. That hubris was fuelled by giddiness from politicians and executives at the turn of the century about the plane maker itself and the European Union.Airbus was created in 1969 as a loose consortium of European aerospace companies. After a slow start, by the late 1990s it had squeezed McDonnell-Douglas out of the market and was nipping at Boeing's heels.The corporate champions fit with the growing stature of the EU, created in 1993, and its single currency, the euro, which made its debut in 1999. When the Airbus partners announced their merger in October 1999, it was unveiled by French Prime Minister Lionel Jospin and German Chancellor Gerhard Schroeder."Europe has succeeded with the great feat of the euro," said French Finance Minister Dominique Strauss-Kahn at the ceremony. Integrating Airbus "is a euro of industry."Fusing Airbus was deemed a prerequisite for undertaking a project so ambitious as a superjumbo, which in turn would bond the partners, said Jean-Luc Lagardère, who was co-chairman of Airbus's holding company."This aircraft will be the cement of the company for years to come," Mr. Lagardère said when Airbus launched the A380 in June 2000.Write to Robert Wall at robert.wall@wsj.com and Daniel Michaels at daniel.michaels@wsj.com

Airbus wonder proves to be a tactical blunder

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