Saturday 23 May 2015

Trichet is keeping a beady eye on Airbus Group

John Lynch

Published 04/08/2014 | 02:30

Jean-Claude Trichet, former president of the European Central Bank
Jean-Claude Trichet, former president of the European Central Bank

Ever wonder where Jean- Claude Trichet went after he and his ECB friends persuaded the Irish government to save the European banking system?

Well, for one thing, he managed to get a seat on the board of the Airbus Group, the global leader in aircraft and space rocketry. It is unlikely that he will be a 'grunt-a-month' director, because he and his fellow directors face quite a challenge in organising the present restructuring at Airbus as it pursues the endless battle for supremacy with the American giant, Boeing. Airbus Group is part of the great European dream and it is arguable that just as Mr Trichet was defending the euro in his previous job, championing Airbus is part of the same ambitious, long-sighted project.

The formation of the Airbus Group owes its origins to the desire of European governments to have a single manufacturing company for European defence. It wasn't an easy project to get started, or indeed hold together. It required the initial involvement of many well known names like British Aerospace (BAE), Daimler, Aerospatiale, Marconi and the Spanish company CAS. In 2001 the company was incorporated as European Aeronautic Defense and Space Company (EADS). In 2006 BAE sold its 20pc stake but six years later looked to a possible merger with EADS. Following political discussion between Britain and France, Germany and Spain the idea was jettisoned.

Airbus Group now functions with three business divisions: Airbus, Airbus Defence and Space, and Airbus Helicopters. It is a very large operation with sales of €59bn, 144,000 employees worldwide, operating profits of €2.60bn. It spends €3bn a year on research. The company produced the first 'fly by wire' (computer) aircraft and has the largest passenger aircraft in the world (cost €300m/550 passengers) and is the second largest producer with a range of short-haul, long-haul, wide- and narrow-bodied planes.

The company has significant sales worldwide. Last year it recorded €21bn of sales in Europe, €19bn in the Asia Pacific region, €9bn in North America and the remaining from the Middle East and Africa. At the beginning of this year the group had an enormous order book of €686bn so giving it visibility for future production planning and profitability. Forward orders in 2014 are up 18pc with Asia Pacific at €220bn followed by Europe at €160bn and North America and the Middle East €120bn each. Africa brings up the rear.

The group's civil aircraft producer, Airbus, is the biggest division in terms of sales and employees. The division accounts for almost two-thirds of the group revenue (€40bn) with operating income of €1.6bn, and overall is the engine of growth for the group. Recently the company decided to tackle Boeing's dominance in the profitable wide-bodied aircraft market by revamping its popular long-range jet with a new fuel efficient option. This should prove interesting.

Airbus Defence and Space is the second largest space business in the world. This division became operational this year following the amalgamations of a number of subsidiaries. The new organisation has four business units: military aircraft, space systems, communications technology and electronics. The division generates revenues of €14bn and operating profits of €700m.

Airbus Helicopters' revenue last year was €6bn and operating profit €400m, with servicing accounting for 40pc of revenues. It has 45pc of its market, with three-quarters of its revenue coming from outside Europe.

Airbus' full year profits improved with revenue increasing 5pc, and operating income of €2.6bn reflecting the higher delivering of commercial aircraft. This year projections are positive for commercial aircraft with helicopters expecting an upswing in orders and an increase in income from servicing. Last year the company announced a radical restructuring to increase financial stability, cost control and improve productivity. Mr Trichet can bring his expertise to some of the Airbus challenges like buying foreign exchange. He has also had a crash course in what austerity can achieve which may be a good thing.

Irish Independent

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