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THE AIRBUS STORY

At the beginning of 1995, Airbus Industry was able for the first time ever to announce more contracts than Boeing for the past financial year. And for the first time since 1945 the US giant has to confine itself with a second place behind a competitor.

With a market share of 51 percent the consortium managed to achieve what only the keenest of optimists had believed to be possible when the "Economic Interest Group" (Groupement d'Interet Economique, GIE) Airbus Industry was founded on December 18, 1970. Customers have accepted the European aircraft products as a viable alternative to the undoubtedly good quality products from Seattle.

Is this a logical conclusion of economic-strategic calculations? Not as a whole.

On one side, manufacturers of civil aircraft in Europe accomplished several notable successes from 1950 to 1970, like the first commercial jet aircraft Comet and the world's only supersonic airliner in service, the Concorde, which is unique and currently still in service. However on the other side, an industry structure which offers profound and solid prospects for the future does not seem to evolve yet. Reasons for this might be the limited size of national air traffic markets or the lack of harmony within European airlines concerning their product buying specifications.

Things are different in the USA. The symbiosis between government and industry regarding civil projects has proved to be effective after positive synergy developments during World War II and therefore is continually being fostered.

The result of this is well known: Boeing, Lockheed and McDonnell Douglas dominated the whole business, supported by various government agencies with substantial fundings for research and development.

For example, a military tanker, known today as KC-135, was developed for about $2bn on oder of the US Defence Ministry. The "cheap" spin-off was to be the Boeing 707.

While European airlines are operating 25 percent of the global airliner fleet, the European aircraft manufacturers' share of the global market only amounts to ten percent. 85 percent of all commercial aircraft are made in the United States, five percent are bulit in the rest of the world.

In the mid 60s it becomes more and more urgent for the industrial and political decision-makers to act.

Being fully aware of the dangers of a one-sided market dominance by the United States, the French and British governments have recognised that the path of avoiding a US monopoly can only lead to inner European co-operation.

Shortly afterwards first contacts between the British Aircraft Corporation (BAC) as well as Hawker Siddeley Aviation and the French aviation industry, Nord-Aviation and Breguet Aviation, later Avions Marcel Dassault) are made.

Finally, the HBN Group with headquarters in Hatfield is being formed with Hawker, Breguet and Nord-Aviation. In the following time the British-French team develops five design studies, the HBN 100 to the 104.

At the same time the "Arbeitsgemeinschaft Airbus" (working group Airbus) is founded in Germany. Signing a contract on December 23, 1965 ATG Siebelwerke, Bölkow, Dornier, Flugzeug-Union Süd, HFB (Hamburger Flugzeugbau), Messerschmitt and VFW (Vereinigte Flugtechnische Werke) commit themselves to be national partners in any future European program which is concerned with technology in the aviation industry.

Meanwhile in order not to be left out the French Sud-Aviation has also brought its project study "Galion" in line with the specification data of the HBN designs. After it has become evident that Breguet will be absorbed into Dassault, the French government decides that Sud-Aviation, a company experienced in aircraft construction (Concorde, Caravelle, Alouette), will be the French partner in the Airbus business.

At the end of January 1966 British, French and German government representatives meet for the first time on an official "Airbus mission". During this meeting the national partners of the first European civilian major aircraft program are introduced: Hawker Siddeley, Sud-Aviation and the Arbeitsgemeinschaft Airbus.

Regular meetings take place from February 1966 onwards, during which market studies and their acceptability with leading airlines are discussed. Very soon it becomes obvious what the actual design of the new Airbus should be like: 200 to 225 seats, a range of 2200 km and direct operating costs 30 percent below those of the Boeing 727-100.

During the first formal meeting of the "Board of Directors" of the interest group, which takes place in September 1966, an application for financial support from the three relevant governments is made. On October 15, this application for funding is submitted together with a product brochure for this project now known as A300.

In mid July 1967 the first study about the A300 is complete and the aircraft has grown considerably. The planned diameter of the fuselage is 6,40 meters, which even is wider than the 747. As the name Airbus already indicates the aircraft is intended to carry 300 or more passengers.

Some time later the fuselage diameter is reduced to 5,97 meters, but the length is increased from 48,70 meters in July 1967 to 53,92 meters in July 1968. The A300 will be powered by two 47,000lbs turbofans. In order to prevent a decision for the already existing Pratt & Whitney JT9D-3, Roll Royce offers the RB. 207, which is obviously the option preferred by the British Government.

The official program start for the new mass transport aircraft is planned for June 1968. This is exactly what the French Minister of State for Foreign Affairs, André Bettencourt, the British Minister of State for Technology, John Stonehouse, and the German Secretary of State in the ministry of econimics, Dr. Johann Schollhorn, agreed on one year before. Hawker Siddeley and Sud-Aviation (37,5 percent each) are sharing the development costs amounting to what was then #190mio. The Arbeitsgemeinschaft Airbus covers the remaining share of 25 percent.

The development costs for the RB. 207-Turbofan, which are estimated at #60million, - (experts used to estimate the necessary investments at 20 times this amount) will be paid by Rolls Royce (75 percent), the French Snecma (12,5 percent) and the German MAN (also 12,5 percent). This is how far the theory goes.

At some stage during 1968 it becomes apparent that the A300 is simply too large for the market and that one was led by some euphoric craze. Apart from this the Rolls Royce engines never came into being.

Roger Béteille, the then director of the Airbus Program at Sud-Aviation, appears to have recognised the problem at an early stage. Together with his team of engineers he almost secretly develops a solution which in his opinion will serve the market better. The result is the A250. Again the saying "nomen est omen" applies: The capacity of this aircraft is for 250 passengers. The diameter of the fuselage is now 5,54 meters, the length 48,30 meters. This model is accepted as the A300B, a modified version with a weight of 125 tons, which is 25 tons less than the A300. The Pratt & Whitney JT9D or the General Electric CF6-50 engines are considered to power the aircraft.

After more than 3700 test hours using over 30 various design proposals, the very first Airbus aircraft program enters its final design stage at the beginning of 1969.

However, out of the blue Great Britain shows hestitations. The Minister of Technology Anthony Wedgwood announces that he is not keen on "technomania". He is furthermore displeased that the new Airbus will be a European product in which the British will not have a leading position. And all of a sudden one is not too sure on the island whether "some kind of Airbus" will sell at all. The British Government has more important issues to deal with.

The background of this decision is the following: Great Britain's main interest is supporting the expansion of Rolls Royce's market position. After the before mentioned RB.207 engine has been disclosed to be a paper tiger by the partners from Seine and Rhine, and one thinks to be safely established in the important US market with the application of the new RB.211 in the new Lockheed L-1011 TriStar, the "Empire" is certain that it does not need the Airbus-Program any more.

After several unsuccessful talks the French Government under Charles de Gaulle and the German Government under Kurt-Georg Kiesinger's Great Coalition give their formal consent to support the construction of the prototype of the A300B with or without British participation.

On May 28, 1969 the French Minister of Transport Jean Chamant and the German Minister for Economy, Karl Schiller, sign the official lauch contract of the A300 Program.

Further attempts to get Great Britain back to the negotiation table of the Airbus partners are met with a final refusal by the conservative government in London in the mid of 1970. These are the reasons given:

• 1. Funding for the development of the Concorde and the Rolls Royce RB.211 is already too high.
• 2. Disillusionment about the choice of the American engine option, (although Rolls Royce has never actually submitted a serious counter-offer)
• 3. The priority commitment to support the national airliner project of the British Aircraft Corporation, the BAC 3-11, (the program is cancelled shortly afterwards).

On December 18, 1970 Airbus Industrie, (AI) is founded by France and Germany, the two remaining contract partners, who each have 50 percent of the company's shares. Hawker Siddeley does not entirely leave the Airbus program. The company takes responsibility as sub-contractor for the production of the wings and finances the development costs itself.

The form that was chosen for AI, the "Groupement D'Interet Economique" (GIE), is a joint venture according to French jurisdiction. This should enable two or more partners to develop or improve and simplify the efficiency of economic activities. While the partners continue to exist as independent companies and are even able to compete in other market with each other, the GIE keeps the ownership rights over all developments of new products in the business area concerned. The actual headquarter building is property of the GIE. Conventional balancing principles are applied, i.e. a profit and loss account has to be annually presented to the Board of Directors. However, there is no obligation to publish these figures. The GIE is also allowed to determine the time for the payment of taxes on profits, depending on the economic situation in some cases. The financial result is passed on to the partners according to their shares. They are also not obliged to publish the figures. The potential drawback of this solution is that the partners are not only liable for their share, but for all liabilities and responsibilities of the entire company. Airbus Industry is the first example of this type of company structure at an international level.

But who are the founder members of the new consortium? The French side consists of the Aérospatiale Group which was created when Nord- and Sud-Aviation merged on January 1, 1970. The German part involves Messerschmitt-Bölkow-Blohm (MBB) and VFW-Fokker. Only these two have remained out of the former seven companies which made up the Arbeitsgemeinschaft Airbus.

The last mentioned company is the German part of the Dutch Fokker-VFW. Fokker and the Vereinigten Flugtechnischen Werke GmbH Bremen only merged a short time before. VFW had evolved from the Focke-Wulf Works and the Weser Flugzeugbau GmbH in 1964.

VFW-Fokker and the Fokker-VFW are involved in the A300B Program as companies in their own right, VFW-Fokker as a shareholder of the Deutsche Airbus GmbH, which is a 100 percent daugher company of MBB, and Fokker-VFW is a partaking Dutch company. (Much later, in December 1980, VFW is absorbed into MBB without Fokker).

The Deutsche Airbus GmbH is founded by MBB in order to "enable the financing of the high production costs of the Airbus Program". Heading the Board of Directors is the then Bavarian Minister of State Franz Josef Strauss. He was among the committed initiators from 1967, when first concrete negotiations about the intended new European aircraft company took place. Therefore he can rightfully be called one of the fathers of Airbus Industrie as well as Sud-Aviation President Henri Ziegler and the already mentioned Roger Bétteille and Felix Kracht, the first production and sales director of the Deutsche Airbus.

In practical terms the financing model of the Deutsche Airbus GmbH looks as follows. The company takes bank loans which are then guaranteed by the Federal Government. Depending on the agreement the Federal Government initially takes on almost 100 percent, later 90 percent of the costs of a new aircraft development, and in the case of a modification it pays 85 percent of the costs. Depending on the category, whether it is initial financing, an allowance towards development or contributions towards mass production, funds either do not have to be repaid at all, have to be partially repaid or even in full.

Even if this type of subsidy has been quarreled over vehemently from the very start, the benefits for the economy, i e top technological portfolio, income through taxation and creation of jobs, cannot be denied. Onlookers from across the Atlantic are obviously anything but pleased.

One day before Christmas 1971, which is a bit over a year after Airbus Industrie was founded, the state-owned Spanish CASA (Construcciones Aeronauticas SA) joins the consortium with a share of 4,2 percent, which has up to then consisted of two nations only. The French and German shares in AI are thus reduced to 47,9 percent.

The big day has arrived on October 28, 1972. The very first Airbus, the A300B (B1) with the registration F-WUAB takes to the air. Four prototypes take part in the following certification program. On March 15, 1974 after 1589 flight hours the French and German aviation authorities (DGAG and LBA) award the Airbus its certification.

The first aircraft out of the production first flies April 15, 1974. However, this model which is the certification model, is not identical with the original B1-model anymore. Its fuselage is longer by 2,62 meters and therefore has a higher passenger capacity (269 all economy with 86,4 cm distance between the seats). It furthermore offers a larger range of 4261 km as opposed to 3,900 km. The A300B2 was built because of pressure from Air France, and started servicing the route Paris-London on May 23 of the same year for the French airline with 25 First Class passengers and 225 Economy passengers on board.

Air France is the first and as it seems for a long time the only customer who puts any trust into the European large aircraft program. After the French national carrier's launch order of six A300B plus six options dated from November 1971, it takes until May 1973 until the German Lufthansa places an order for three aircraft (plus four options).

On March 26, 1975 the up to then largest version, the A300B4 (max. take off mass 157,5 tons, range 5930 km), receives German and French certification.

During the following year Airbus starts to think seriously about a shorter version of the A300B4. The motive for this is to enter the important US market by offering an obvious alternative to the established 727 and DC-10.

The 46,66 meter long "B10", a version of the B4 shortened by 13 frames or almost seven meters, is to accommodate up to 220 passengers.

The necessity for offering a wider product range is unfortunately in balance with revenues, which explains negative reports about Airbus Industrie in the mid 70s. The news are full with stories of losses in range of billions of German Marks. The Federal Government is said to have to give enormous subsidies without ever expecting to get them paid back.

Airbus Industrie does indeed not receive a single order for 16 months, i e between the end of 1975 and May 1977. In Toulouse the joke "don't miss the last train out of town", circulates.

Thai Airways International ends this lean period by ordering ten A300B4. With another order Airbus finally manages to enter the US market: Eastern Airways Boss Frank Borman orders four A300B4.

This opens the way for further plans: For the first time a model of the B10 can be seen at the ILA 1978, which at that time still takes place in Hanover. The aircraft is then already known as the A310.

The official launch for Airbus's "small" medium range twin follows shortly afterwards in July 1978. In 1979 Great Britain finally becomes an official partner in the Airbus Consortium. The newly founded British Aerospace takes on a 20 percent share.

About the BAe's history: As from January 1, 1978 the British government had nationalised Hawker Siddeley Aviation Ltd, the British Aircraft Corporation (Holdings) Ltd and the Scottish Aviation Ltd named it British Aerospace.

Like Hawker Siddeley before, BAe is responsible for the construction of the wings for the Airbus program.

The Airbus Consortium structure now looks as follows: 37,9 percent of the shares are held by each Aérosptiale and Deutsche Airbus, 20 percent by BAe and the remaining 4,2 percent by CASA. The UK has entered AI ten years late and has a much lower share in the Airbus business than originally planned (37,5 percent). This has meant a loss to the British Industry of about DM55bn as estimated by experts for the time from 1978 up to 2010.

In 1979 the decision is made to develop a 130- to 170-seater. One of the reasons is to take market shares away from the highly successful Boeing 737. However, until the program officially starts, five years will have to pass. In 1981 BAe is privatised, which does not have any major repercussions on the consortium.

In April 1982 the A310 takes off on her successful maiden flight. Its engines are either two Pratt & Whitney JT9D-7R4D1 turbofans rated at 213,5kN (48000lbs) or two CF-6-80A3 (222,4 kN/50000lbs). The A310 in its dash 200 basic version can carry 220 passengers (Business and Economy Class) over distances of up to 6700km. The twinjet receives its certification in September 1983.

Six months later on March 23, 1984 work on the A320, the first "standard fuselage model" of the Airbus Family begins. This model has only one isle in the cabin.

Another eight months later in November 1984 a "convertible" model of the A310, the -200C, which can also be used for cargo, enters the market.

With a successful entrance into the market segment of the 200 and 250 seaters (A300 and A310) and with the A320 on track as 737 opponent., the time has come to take the next step in Toulouse, Munich, London and Madrid. The company wants to concentrate on the upper end of the market.

On August 27, 1986 the Airbus Board of Directors gives the go-ahead for the completion of the product range. On June 5, 1987 two projects are officially launched: the long-range models A330 and A340. Specifications for these aircraft had already been introduced tentatively at the Farnborough Air Show in 1982. They were then known as TA9 and TA11.

Airbus needs money to develop these models, indeed "far too much money" according to public opinion. "The Airbus project, which already has major financial problems and which is not profitable enough, is supposed to gobble up another DM7bn", is the critical report in several newspapers.

Until then about DM4.2bn had been spent by the government, an overall DM5.6bn had been promised. The fact that the latest funding which, apart from subsidizing the development costs of the series production for the two new programs, is to help out with old debts does not help to make the situation more acceptable.

Erich Riedl, the then parliamentary Secretary of State of the Federal Ministry of Economic Affairs and the government's co-ordinator for German Aerospace, argued as follows. "The annual amount German tax payers have to fund is more than justified in view of the fact that it safeguards many jobs - especially in northern Germany". He was to be right.

Four months before the Airbus-widebodies are launched on February 22, 1987, the digital era in airline technology dawns with the maiden flight of the A320. At the same time the Federal Government contacts Daimler-Benz and asks for participation in MBB.

Edzard Reuter, Daimler's boss shows interest, yet he states that he is not willing to take any Airbus risks concerning the government's demand for his commitment to Airbus. Reuter said, "It is not a game of poker. We will not get involved until the Airbus Program is economically viable". Despite of this, Daimler-Benz decides to enter negotiations.

At the highest level the following take part in these talks: Gerhard Stoltenberg, Minister of Finance, Martin Bangemann, Minister for Economic Affairs, the aforementioned Secretary of State and co-ordinator Erich Riedl, Edzard Reuter and the MBB Head of the Board of Directors, the Bavarian Minister of Finance Max Streibl.

On February 26, 1988 the A320 receives its certification. At the beginning of April of the same year the first aircraft starts operating for Air France.

In December 1988 the Daimler-Benz Board of Directors agrees to the MBB take-over. The merger is registered with the Federal Monopolies and Merger Commission.

In April 1989 this federal authority prohibits Daimler's multiple share in MBB. One of the reasons is that there would be a market monopoly in the areas of defence technology, space flight technology and trucks.

On May 2, Daimler-Benz puts in an application at the federal ministry of economics for an exception license.

Some two weeks later on May 19, 1989 Daimler founds the Deutsche Aerospace AG as a 100 percent daughter company by joining Dornier GmbH, the MTU Motoren- und Turbinen-Union Munich/Friedrichshafen GmbH as well as two areas of the AEG AG.

The company's initial equity is DM1.6bn. Head of the Board of Directors is Jürgen E. Schrempp.

On August 2, of the same year the Federal Monopolies and Merger Commission advises the Minister for economic affairs to admit MBB's multiple share dealings through Daimler-Benz on the premiss that it has to offer a common good. On September 6, Bangemann successor Helmut Haussmann gives his approval.

On November 17, the company's shareholders and MBB's Board of Directors give their consent to the take-over. From now on MBB is a daughter company of the Deutsche Aerospace.

The dash 300, which is the long range version of the A310 with a range of 9600km, receives its certification in the same month. The AI Board of Directors approves the launch of the program for the 320's "brother", the Airbus A321.

On December 8, 1989 the new Deutsche Airbus GmbH with headquarters in Hamburg is founded. It originates from the MBB business group of Transport and Commercial Aircraft and the former Deutsche Airbus GmbH. 80 percent of the new Deutsche Airbus belong to MBB, the Credit Institute for Reconstruction (KfW) has a share of 20 percent.

Deutsche Airbus employs 18000 staff in altogether six locations (Hamburg, Bremen, Einswarden, Lemwerder, Varel and Stade).

The Federal Government smoothes the path for the Daimler-Benz/MBB merger by agreeing to pay off old debts amounting to DM3bn as well as giving a guarantee to fund current manufacturing costs amounting to DM1bn.

The company is also very keen for the government to cover losses arising from risks posed by the exchange rate. The sale of Airbus aircraft was calculated when the exchange for one Dollar was DM2.

Due to the merger, the turnover of Deutsche Aerospace (1987: DM10.8bn) catches up with the two other leading European aerospace companies British Aerospace (DM12bn) and Aèrospatiale (DM12bn).

In autumn 1989 the go-ahead is given at Lufthansa to use a new generation of aircraft for short and medium haul flights. On the routes Frankfurt-Zurich and Frankfurt-Vienna the first two Lufthansa A320 are put into service. The Boeing-727-Fleet is being replaced by these new Airbus-Twins which accommodate 134 passengers in three classes and reportedly use 40 percent less fuel per seat.

Lufthansa plans to save 110000 tons of kerosene per year by replacing its reliable workhorse, the 727. The engine emissions of the A320 contain 90 percent less unburnt hydrocarbon and 73 percent less carbon monoxide when compared with the Boeing's emissions.

The really exciting news to public is that the "computerised aircraft" has been introduced to Lufthansa.

The A320 is in fact the first commercial subsonic aircraft, in which the flight controls is initiated via electronic signals across the entire flight performance and is being controlled via redundant computer architecture.

Soon the Airbus crews are welcomed at the Lufthansa home base in Frankfurt with the words, "Well, did your aircraft fly you back home again?"

Two years later on October 25, 1991 the A340 takes off on its first flight.

In May of the following year the Airbus Board of Directors approves the program start of the up to then smallest Airbus, the A319.

On November 2, 1992 the first A330 takes to the air.

Seven weeks later, two days before Christmas 1992, the A340 receives its certification by the European aviation authorities for its dash 200 and dash 300 versions (higher passenger capacity). Another two months later, in February 1993, Lufthansa puts the first four jet Airbus into service.

In January 1993 the four European aerospace companies Dasa, Aèrospatiale, British Aerospace and CASA together with Boeing decide to examine the development of a "very large commercial aircraft" in a feasibility study, which is to take one year. On March 11, 1993 the A321 takes off on its maiden flight.

On October 21, the A330 receives its certification, after which the twin starts operating with Inter Air from France in January 1994. On March 18, 1994 the up to date largest standard fuselage Airbus, the A321, commences its service with Lufthansa, shortly after certification.

On September 13, 1994 the new Airbus super transport aircraft, the A300-600ST "Beluga" successfully completes its four and a half hours enduring first flight in Toulouse. The Beluga is fitted with General Electric CF6 engines. The MTU Munich is also involved in manufacturing these. The maiden flight of the A319 takes place on August 29, 1995.

The feasibility study about the "Very Large Commercial Transport Aircraft", the VLCT, concludes on July 10, 1995 with the result that any technological problems posed by this kind of project are solvable. However, since airlines have potentially too little demand, it is just decided to "continue watching the market".

In January 1996 the Beluga starts transporting components between Airbus locations. Eight weeks later Airbus creates the "Large Aircraft Division". Its purpose is to push ahead the concept definition for a possible "mega" liner.

On May 8, 1996 (four weeks after its certification on 10 April), the A319 carries the first passengers for Swissair.

In January 1997 the four partners in the Airbus Consortium strike up an agreement to change AI into a single corporate entity. It will not only be responsible for sales, marketing and product support, but also for development, production and customer service.

During the Paris Aèrosalon in 1997 Airbus announces the program launch of the ultimate A340-expansion stages: In the dash 500 version the Airbus widebody is planned to transport 316 passengers in three classes over distances of almost 16000km. The high capacity dash 600 will fly 375 passengers over distances of almost 14000km.

The maiden flight for both models is scheduled for this year. If everything goes according to plan, hand-over to customers will take place in the middle of 2002. On August 13, 1997 the long range version of the large Airbus twin, the A330-200, performs its first flight.

In April 1999 the European Aircraft Construction Consortium announces the launch of the A318. The up to date smallest Airbus model is intended to prevent the Boeing 717 to become too successful. The maiden flight of the A318 is intended for the third quarter of the year 2001. The smallest Airbus version will be in service before the end of 2002.

Another three years later, according to today's plans, the pride of the Airbus fleet will revolutionise the top end of the airliner market in 2005. Airbus intends to break the monopoly of the Boeing 747 with the A3XX. The Boeing is the "Jumbo-Cash-Cow", which has enabled the Seattle based company to start aggressive price wars time and again. Airbus feels compelled to come up with a counterbalance and to place it on the market.

The new "mega" liner will be offered in three versions with a capacity (in theory) of up to 1000 seats and ranges of more than 16200km. It will then lower the operating costs of the now 30 year-old Boeing flagship by 15 percent (this is achivable because of the higher seat capacity alone).

With a market entry in the second half of the next decade the A3XX would be on time helping to avoid the expected capacity bottlenecks on the highly congested racetracks in international air traffic. It will furthermore open up a new dimension for passenger aviation, similar to the 747 30 years ago.

Considering development costs of $12bn the A3XX has to be called a very risky project. It is without doubt the biggest challenge for the four nation European Consortium since such large investments limit funds for developing of the remaining product range. To some insiders the A3XX seems to be the governor of Airbus' future.

Whatever the outcome may be, at the moment Airbus is the "Co-Number-One" in international aircraft manufacturing. The company's product philosophy has obviously paid off. After initial teething-troubles and some tough lessons, the European aircraft industry has matured. And even the hardest critics have to acknowledge today that Airbus Industrie is the most important European industry project. It has become a symbol for technological equality in Europe and for the continent's political and economic integration.

From page 14 of FLUG REVUE 2/2000