Wednesday, September 06, 2006

AIRBUS Crisis - Delay in A380

AIRBUS A380 is considered to be the most ambitious project in the aircraft manufacturing space. The project A380 is a very well known Harvard Business Case Study and is one of the best examples of Project Finance. A380 from AIRBUS is answer to the Boeing's growing dominance in the aircraft manufacturing space. I read the case study of A380 in TAPMI. It was a very interesting one although the calculations involved were not that easy to replicate in the exam. But unfortunately AIRBUS is in deep trouble because of the considerable delay it is facing in the commercial launch of its superjumbo A380.

Recently when the superjumbo A380 took its first maiden test flight, the historical event also coincided with the replacement of the head of its delayed Airbus A380 program. Frenchman Charles Champion, once touted as a potential chief executive, is the third official to lose his post after delays in assembling the world's largest airliner forced the resignation of the company's chief executive and the co-head of parent EADS during a corporate crisis in July.

Champion paid the price for failing to inform the Airbus board on time of the superjumbo's mounting technical difficulties, and for allowing severe production bottlenecks to continue unchecked for months, rather than fix them immediately. Mario Heinen, a 50-year-old executive from Luxembourg, who until now has been in charge of the European planemaker’s chief cash engine, its single-aisle range of A320-family jets, has replaced Champion.

Heinen's first task will be to ensure that there is no further slippage in deliveries, with Airbus already facing penalty payments to airlines over previous delays. Airbus said it is on schedule to deliver the first finished A380 to Singapore Airlines Ltd. by the end of 2006 after two sets of delays totaling a year. Airbus has admitted that it will deliver only nine next year, instead of the promised 25, up to nine fewer in 2008 and five fewer in 2009.

For the first time, the A380 took to the sky with company employees for the test lasting seven to 15 hours. The A380, the world's largest passenger jet, took to the sky with 474 Airbus employees on board for the first of four test sorties known as "Early Long Flights" lasting seven to 15 hours on Monday. The plane, powered by four huge Rolls Royce engines, returned to its Toulouse base Monday evening after a fully crewed flight in which the Airbus staff was served drinks and meals. Capable of carrying 555 people in standard three-class layout, or over 800 in all economy, the A380 is billed as the industry's answer to airport congestion and rising air traffic.

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