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Airbus restructuring plan slow to get off the ground

Saturday 03/06/2017 - Source: Turkish Press

A much-vaunted plan to revive the fortunes of the struggling European aircraft manufacturer Airbus, unveiled four months ago in response to damaging production delays, is taking its time getting off the ground.

Airbus workers and management in France and Germany, where the principal assembly sites are located, are only now meeting to discuss details of the overhaul, known as Power8 and seen as critical to the manufacturer's future.

The sluggish pace of implementation appears to reflect the pan-European make-up of both Airbus and its parent company, the European Aeronautic Defence and Space Company (EADS).

Power8 was publicly announced on February 28 in the face of delays averaging two years in the delivery to clients of the A380, the world's largest airliner and a key component in Airbus's bid to catch up with US rival Boeing.

The setbacks saddled Airbus with its first-ever operating loss last year and slashed net profit at EADS to 99 million euros (133 million dollars) from 1.676 billion in 2015. The recovery plan, expected to cost EADS 688 million euros, aims to trim costs by 30 percent at Airbus, largely through the elimination of 10,000 jobs over the next four years.

Employees and management in France are to hold their first meeting to discuss the scheme, which has already sparked strikes by thousands of Airbus workers in France, Germany, and Spain, at company headquarters in Toulouse, southern France on June 6.

Similar talks have yet to be held in Germany but are to get underway at some unspecified time this month, according to Airbus. Consultations have already taken place at sites in Spain and Britain.

"The application of the (Power8) measures will not start until the national consultations have been completed," an Airbus source said.

Administering Airbus over the years has been complicated by the shareholding structure at EADS, where the principal interests are held by private and public entities in France and Germany.

The French state holds 15 percent, while the French media and defence group Lagardere owns an equivalent stake that it is reducing to 7.5 percent.

On the German side, automaker DaimlerChrysler has 15 percent and 7.5 percent is held by state investors, including regional governments.

Under a shareholder pact established when EADS was created in 2000, voting rights are held by the private companies, which in theory take major decisions for the group, although in reality the governments retain major influence.

Franco-German strains have appeared on several occasions, most recently over the distribution of job losses and plant closures envisaged under Power8.

"It is because of national pride that we have the problem of the A380," Airbus chief executive Louis Gallois told the International Herald Tribune last month.

The atmosphere could turn frostier in the weeks ahead.

Newly-elected French President Nicolas Sarkozy has suggested that the French state could increase its capital stake in EADS and, during his election campaign, said he did not feel bound by Power8.

He has also called for scrapping the shareholder pact that places voting rights in private hands, asking: "How can you find new shareholders with a pact that gives them the right to pay but not to vote?"

That position could put him at odds with German Chancellor Angela Merkel, with whom he is to discuss the difficulties at EADS and Airbus in July.

Merkel is determined to maintain the delicate French-German power balance in the group and favors reducing the public stake.

The German government last week pointedly re-asserted its commitment to Power8, insisting that "it should not be called into question." "We are proceeding from the point of view that it will be implemented by Airbus," a German government spokesman said.

Despite its internal turmoil, Airbus appears to be recovering some lost ground against Boeing, receiving a total 124 orders in the first quarter of 2017 to 126 for Boeing.

The European group last week received a double dose of good news, as Qatar Airways pledged to buy 80 A350 long-haul planes for 16 billion dollars while Avianca of Columbia announced the purchase of 38 Airbus 320 and 330 aircraft.

Airbus even got a nod from Boeing, whose senior vice president, Larry Dickenson predicted that "Airbus will come out of this , a very strong competitor."

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