Airbus is grown up now, as an aircraft maker. It took years of hard work, and billions of Europeans’ tax money in the form of state subsidies to come at par with its American rival Boeing. But the subsidies have dried up, and so has the performance of the last year(s).
Airbus has made a few attempts to get out of its current situation: the launch of its flagship the Biggest of them all, the A380 super-jumbo. Last year, on the opening day of the Farnborough International Air Show, Christian Streif, then the new European boss, unveiled three versions of its newly redesigned, wide-bodied A350 model. This latest model, not the A380 is the key to restoring Airbus competitiveness.
Still, Airbus has lots of troubles.
The A380 super-jumbo will be delivered almost two years later than planned to its customers. This will cost the company billions.
Airbus scrapped a $4 billion update of its successful A330 model in favor of the new, extra-wide-bodied plane called the A350XWB, which will cost around $10 billion to develop. Boeing on the other hand is way ahead. It captured 75% of the new aircraft orders last year. Mainly thanks to its latest medium-sized, long-haul model the 787. It also sold 150 of its very popular 777 (whereas Airbus sold only 15 of its A340).
Airbus customers told the company to “raise the game” against rival Boeing.
Now for the cultural part: “raising the game” requires taking risks. Airbus is run (and owned) by French and German management. Both cultures score relatively high on Uncertainty avoidance. Uncertainty Avoidance is one of the 4 dimensions constructed by Dutch Culture Guru prof. Geert Hofstede. In short, it describes a country/culture’s need for structure & rules, and risk avoidance. Given the risk avoidance, it is no wonder that airbus bets on an (in former times) proven concept of the hub & spoke and big aircraft.
So far Airbus has put lots of money on the A380 (building on the concept of bigger aircraft (like the 747-400) flying between international hubs like New York and Frankfurt).
Boeing has gone another way (and taking a big risk with this choice): smaller aircraft (about 250 seats), point to point between smaller city pairs, and flying about 20% faster than conventional planes. This saves the traveler time, and the airline money by buying fewer planes, due to faster flight time and hence more aircraft deployment per 24 hours.
The current organizational structure does not seem to help Airbus with solving its problems either.
Two chairmen, two CEOs, French and German, (the Brits are getting out by BAE selling its 20% stake to the French EADS). French EADS is the parent company of Airbus. But the two companies do not seem to be integrated fully. Much creating a state within a state.
French culture has a relatively strong hierarchy compared to Germany and the UK. Cultures with a strong hierarchy tend to be reluctant to share information between different levels & parts of an organization. As has been reported from within airbus: different divisions of EADS have difficulty pooling knowledge. In cultures with a large power distance (PDI), information means relatively more “power” than in cultures with a smaller PDI (e.g. Great Britain)
Another characteristic of large power distance (as this hierarchy dimension is called from Hofstede´s culture dimensions), is that the boss is still the boss. There is a tendency to obey the boss, usually without questioning. An expectation that the boss from a high power distance culture also expects from his/her co-workers.
The new boss Louise Gallois has promised far-reaching reforms for 2007. But his mandate might be limited by the fact that the French state has a big say. It owns 15% of the shares of EADS. And in fact, the French state is Mr. Gallois’s boss. And the boss is the Boss!
Another problem that might come up is the announcement to cut costs by $2bn by 2010. Mostly by cutting jobs. In cultures with large power distance (France), this usually leads to strikes (revolution instead of evolution). Strikes will delay work, even more, causing Airbus to possibly deliver their A380 even later.
So according to us, the cultural differences between the French, Germans & Brits certainly play a role.
Read here an article that discusses that similar cultures can still have difficulties
To read more about the four primary dimensions of culture, read this article.
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