It's hard to be at the helm of an airline manufacturer. Product development time lines are years long. Fixed costs are astronomical. And there's a lot of, um, distractions for senior leaders. But things are even harder when national rivalries are at stake. Last week a loyal reader pointed out that Airbus has been unable to implement a restructuring plan because of protests among its stakeholders. It's a good reminder that some kinds of challenges can lead to failure.
Airbus is owned by the European Aeronautic Defence & Space Co (EADS). It started in 1970 as a response to a shift in market share to U.S. companies like Boeing and McDonnell Douglas, with significant government subsidization from France, Germany, Britain and Spain. For years, the company has struggled to satisfy the governments and labor unions of these four nations.
Most recently, Airbus has struggled to slash costs and increase efficiency in a bid to keep pace with its competitors. Louis Gallois, CEO of Airbus and EADS, has moved to fix the company with a strategy called Power8. However attempts to implement reforms are bogged down in national politics. Each of the four member nations is vying for preferential treatment amid plans for selling facilities, cutting staff and increasing purchases from outside suppliers. Last week, the hosts of CNBC's Morning Squawk cackled with laughter at the Europeans' infighting. Meanwhile, Boeing's new 787 Dreamliner is racking up impressive orders.
So why isn't the challenge of these national co-owners driving improvement? Because these challengers are not fighting to make a better company, but rather to protect personal interests. Organizations need to have a united focus on making better products and services if they want to succeed. Internal debate over the best way to do this is great - for example, multiple design teams fighting for approval of the next airplane design. But infighting over personal benefits only weakens competitiveness against outside firms. This is the same for office politics or national politics, as it takes the players' eyes off the goal of improving profits and customer value.
Last week I shared the example of how NASCAR is winning fans and gaining on other sports leagues because it is owned by a single family. This centralized ownership allows the organization to respond better to the "real" challengers - other sports. And just because NASCAR has a single owner doesn't mean that its makes decisions without consulting others. In fact, the racing teams, fans, and sponsors are part of the program, and NASCAR makes its decisions to best please all parties. If not, these supporters will go elsewhere.
But at the end of the day, troubles at Airbus will mean trouble for Boeing, airplane customers and ultimately consumers. Without a strong rival in Airbus, Boeing will likely grow softer as well, by, say, raising prices on its planes or dialing back R&D efforts on upgrades. Perhaps the best thing for everyone would be for the four governments in Europe to exit the plane game and get back to better serving their people.