Key Characteristics of Airbus - Coursework Example

s the assignment was due Airbus Unison of humans with an urge to usher an organization into a leading‘utopia’ will be a successful endeavor, if the unified humans show undaunted, unabated and unabashed conduct. So, if all the parts of an organization conduct this way, they can be fully utilized to have ubiquitous presence all over the world. Also, at the same time all the parts or departments of the organization should function in unison. Even if one section underperforms, the whole organization would get blocked in a mess. In human body, if one of the organs malfunctions, first the antibodies and ‘body agents’ in combination with brain will send the reinforcements to diagnose it and correct it before external intervention is sought. Likewise, if one of the departments of an organization underperforms or malfunctions, the head of the organization in consultation with the department head or board members would try to locate the problem and fix it. So, the purpose of this paper is to analyze the functioning of Airbus, an aircraft company which represents Europe in the world aviation map, by focusing on its strategies and obstacles Identification of the strategic choices that Airbus appears to have made One of the important strategic choices made by Airbus happened in 2006, when it got restructured due to the exit of the important partner, British Aerospace (BAe). The important issue in this restructuring is that, it was not initiated by the management of Airbus, but due to the initiative of BAe. That is, when Airbus was formed in 1970 with the conglomeration of aerospace companies of four major European nations under the name of GIE, “Airbus France, Airbus Deutschland, Airbus UK and Airbus España, operated as national companies with special responsibilities for producing parts of the aircraft, to be transported to Toulouse for final assembly. The GIE provided a single face for sales, marketing and customer support” (Airbus.com), BAe was not the major initiator. Even though BAe functioned as a team for many years, it pushed Airbus to make a strategic choice. BAe took the steps to move away from Airbus SAS to make itself more attractive to the American market. As a first step, it started selling its Airbus shares, which gave some indication of the direction BAe is going to take Airbus. “In March 2006, reports in the British press intensified about the possibility of a sale, with BAEs 20% "conservatively valued" at 3.5 billion pounds” (search.com). And when the process did move fast enough, BAe brought in Rothschild, the investment bank, to make an independent valuation of the situation, and importantly provide the current value of each partners. And, when Airbus’s launch of its much anticipated A380 got delayed, it led to a controversy involving BAe and EADS. This put both of them, who form the major part of Airbus, in opposite ends, with BAe accusing EADS of adopting unfair means to reduce the value of its shares. “A furious row erupted between the two shareholders in Airbus after BAE Systems accused EADS of deliberately trying to depress the value of the company in order to buy out BAes 20 per cent stake in the European plane maker on the cheap.” (Harrison). When Rothschild valued BAes stake in Airbus only at 1.9 billion pounds, well below than the expected levels of BAe management, it made the decision to sell its stake to EADS for 1.87 billion pounds. This decision of BAe initiated the restructuring process inside Airbus, with EADS attaining a prominent role. Thus, Airbus made this strategic choice and started working effectively The biggest strategic choice, Airbus made was the manufacture and the launch of A-380. “Taking a clean-sheet design for airlines’ operational needs of tomorrow, Airbus developed the A380 as the most spacious and efficient airliner ever conceived. This 525-seat aircraft will deliver an unparalleled level of comfort while retaining all the benefits of commonality with Airbus’ other fly-by-wire” (Airbus). This strategic choice was made in order to be ahead of its main competitor, Boeing, American aircraft manufacturer. “When it enters service in March 2006, the A380 will be the worlds largest airliner, easily eclipsing Boeings 747.” (Airliners.net, 2005). Apart from this reason, the other motive is to build a larger aircraft then the existing ones like A340 or Boeing’s 747-400. Also, it wanted to add new ones to the already existing fleet of aircrafts. “Airbus started the development of a very large airliner (termed Megaliner by Airbus in the early development stages) in the early 1990s, both to complete its own range of products and to break the dominance that Boeing had enjoyed in this market segment since the early 1970s with its 747” (wikipedia). So, when it found these sets of reasons and positive market potential, Airbus involved itself full time in launching or actualizing its major strategic choice of A380. The extent Airbus has met or exceeded the critical success factors for the sector in the last five years Any organization of the world to ‘script’ a success story needs to ‘actualize’ its targets. The targets will be composed and set; incorporating the organization’s needs to perform in certain areas and also including the needs, expected from the sector, in which the organization operates. The steps to incorporate those needs into the company’s targets and successfully achieving it, are only critical to the success of the organization. “The organization must perform well in those key areas on a consistent basis to achieve the mission. These key areas—unique to the organization and the industry in which it competes—can be defined as the organization’s critical success factors” (Caralli). In the case of the Aviation sector, one of the important critical success factors is the safety of Aircraft. In Airbus’s case, its safety record was always good with minimum number of lapses. “The Airbus A300 is widely regarded as a reliable aircraft with a good safety record, and has had only eight officially published fatal incidents in 24 years. At least three were due to terrorist activity” (Harper). Even in the accidents that took place involving Airbus, majority of them are due to human error, so the design or the make of the Airbus was not crux of the problem. “Airbus manufacturers say their aircraft have an overall reliability of 99%. Most crashes are attributed to human error rather than a fault with the aircraft.” (bbcnews). Other than this main factor, Airbus was also able to meet the other critical success factors (which are the norm in the airline sector) like making the aircraft weigh little lesser. “As the planes weight rises, fuel consumption increases -- an especially urgent concern at a time of soaring fuel prices -- and so do airport landing fees that are based on the planes empty weight” (Business week). Airbus was able to make its aircrafts weigh a little lesser using number of technologies, including the technology of using a suitable monitor to account and analyse all the things which weighs in the aircraft. “A key factor in enabling Airbus to deliver a competitive commercial advantage over other aircraft manufacturers is simply to deliver lighter aircraft. (capegemini). Even its largest aircraft, A380 was made lighter using composite materials, thus bringing many advantages including fuel efficiency. “The A380’s high level of weight-saving composite materials helps make it a highly fuel-efficient aircraft – it burns 12 percent less fuel than its competitor, reducing exhaust emissions” (Airbus.com). Airbus also achieved or fulfilled the other critical success factor of introducing new models, when needed. That is, in the aviation sector, new models have to be introduced at appropriate times to fight off the competition and also to surge ahead. Even if new model is not possible, existing models should be refurbished to meet the current customer requirements and also safety stipulations. Airbus was able to launch the eagerly awaited model A380 nicknamed SuperJumbo, the world’s largest airline in 2007. This launch thus fulfilled one of the important critical success factors of launching new models to keep up to date with the emerging markets. So, in the case of Airbus all the three major critical success factors were fulfilled helping the organization to grow further. Identification of the resources and capabilities, which Airbus has used to support its business strategy in the last 5 years The performance of Airbus or any other organization can be enhanced only with the availability of trained workers. “…successful innovations require highly trained workers” (Booth and Snower). But, in the case of Airbus due to its frequent job cuts, the important Resource of workforce is not giving their fullest co-operation. “Troubled planemaker Airbus has announced it is to cut 10,000 jobs across Europe over the next four years. France will be worst hit with 4,300 job losses. Germany will see 3,700 jobs go while the UK and Spain will see 1,600 and 400 jobs cut respectively…” (balanced news blog). That is, these job cuts, which were done to cut costs, have dampened their spirit and the inflow of work, with even the finished work being blocked by agitated German Airbus employees. “Workers at Airbus in Germany threatened to hold up aircraft deliveries to step up pressure on management as parent EADS (EAD.PA: Quote, Profile, Research) prepares to make deep cost cuts at the European plane maker.” (Reuters.UK). For the past five years, Airbus workers were not happy with the restructuring plans as well, with many fearing that their jobs will be under threat in the newly restructured environment. Because of this fear, they indulged in frequent strikes and are also showing less inclination to work, threatening Airbus Industrie itself. “Thousands of French Airbus workers have gone on strike in protest at the companys restructuring plans, which include cutting 10,000 jobs. Organisers of the day-long protest have warned of further action if the proposed redundancies are enforced” (bbcnews). So, these reduced resources and thereby the capability of the workers will affect the Airbus both in the short run as well as in the long run. So, Airbus’s future sustenance is dependent on it, amicably solving the workers problem. The financial performance of Airbus over the last 5 years There are certain factors that are affecting the financial performance of Airbus. One of the factors which are affecting its financial prospects is its failure to deliver its new model, A380 to the previously booked customers at the stipulated time. “Plans by EADS Airbus passenger-aircraft unit to deliver 13 of its A380 superjumbos next year and to roll out four of them per month from 2010 are demanding and a great challenge, Airbuss chief executive Thomas Enders” (Forbes). That is, because of the delay in launch, the production schedule of A380 also delayed with the delivery of the Superjumbo Aircrafts being postponed many times. That is, when Airbus initiated the first steps in early 2000, its goal was to “deliver the first A380s to customers after six years in 2006” (Stokes). But, “Airbus revealed … that it will deliver less than half the 25 superjumbo jets ordered to carriers” (Brothers). So, because of this problem, the finances are not rising up, even though Airbus is performing appreciably in other sectors. As Airbus is doing well commercially with good inflow of profits, it can use those resources to aid its business strategies. That what happened with Airbus 380, when majority of the financial resources particularly its profits were diverted to the successful completion of the project, including A380. Even though, A380 was completed and launched, it has fully drained up the financial resources as well as the capabilities of Airbus and thereby blocked the other projects as well. “The resulting costs and charges associated with these delays will impose a significant burden on future financial performance” (EADS) The other negative repercussion of this focus on A380 is the failure to do the spadework on A350, which was considered as the direct competitor for Boeing 787, thus showing negatively on the financial results. “The new plane represents Airbuss fifth attempt to come up with a competitor to the 787” (Rothman). Airbus had assured that spending on Airbuss A350, the planemakers newest model, is not under threat. The widebody is doing ``extremely well in winning orders and the program continues as planned, Ohler said. But, the fact is A380 struck a deep hole in the financial coffers of Airbus (Rothman and Bettinga), blocking attempts to revive the A350 plan. This shows up in the 2007 results. “Airbus operating profits for the six months to June sank to 367m euros ($504m; £246m), 78% down from the same period in 2006 (bbcnews). So, the financial performance of Airbus bordered on lower levels. Bibliography Airbus.com. The A380: The future of flying. Accessed November 25, 2007 from http://www.airbus.com/en/myairbus/airbusview/the_a380_the_future_of_flying.ht ml Airbus. Airbus A380. See the bigger picture. Accessed November 25, 2007 from http://www.airbus.com/en/aircraftfamilies/a380/index2.html Airliners.net. The Airbus A380. 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