History

Airbus Industrie began as a consortium of European aviation firms to compete with American companies such as Boeing and McDonnell Douglas. In the 1960s European aircraft manufacturers competed with each other as much as the American giants. In the mid-1960s tentative negotiations commenced regarding a European collaborative approach began.

In September 1967 the British, French and German governments signed a Memorandum of Understanding (MoU) to start development of the 300 seat Airbus A300. This was the second major joint aircraft programme in Europe, following the Concorde, for which no ongoing consortium was devised. An earlier announcement had been made in July 1967 but had been complicated by the British Aircraft Corporation (BAC). The British government refused to back its proposed competitor, a development of the BAC 1-11 and instead supported the Airbus aircraft.

In the months following this agreement both the French and British governments expressed doubts about the aircraft. Another problem was the requirement for a new engine (to be developed by Rolls-Royce, the RB207). In December 1968 the French and British partner companies, Sud Aviation and Hawker Siddeley proposed a revised configuration, the 250 seat Airbus A250. Renamed the A300B the aircraft would not require new engines, reducing development costs.

In 1969 the British government shocked its partners by withdrawing from the project. Given the participation by Hawker Siddeley up to that point, France and Germany were reluctant to take over their wing design. Thus the British company was allowed to continue as a major subcontractor.

Airbus formed

Airbus Industrie was formally set up in 1970 following an agreement between Aerospatiale (France) and Deutsche Aerospace (Germany) (joined by CASA of Spain in 1971). Each company would deliver its sections as fully equipped, ready to fly items. The name "Airbus" was taken from a non-proprietary term used by the airline industry in the 1960s to refer to a commercial aircraft of a certain size and range, for this term was acceptable to the French linguistically.

In 1972 the A300 made its maiden flight and the first production model, the A300B2 entered service in 1974. Initially the success of the consortium was poor but by 1979 there were 81 aircraft in service. It was the launch of the A320 in 1981 that guaranteed Airbus as a major player in the aircraft market - the aircraft had over 400 orders before it first flew, compared to 15 for the A300 in 1972.

It was a fairly loose alliance but that changed in 2000 when DASA, Aerospatiale and CASA merged to form EADS and in 2001 when BAE and EADS formed the Airbus Integrated Company to coincide with the development of the new Airbus A380, which will seat 555 passengers and be the world's largest commercial passenger jet when it enters service in 2006.

On April 27, 2005, the A380 successfully completed its maiden flight in Toulouse, France. The flight lasted almost four hours, the plane taking off from Toulouse Blagnac Airport at 08:29 UTC (10:29 a.m. local time), going west towards the Atlantic Ocean, turning around above the ocean, flying above the Pyrenees mountains, and landing at Toulouse Blagnac Airport at 12:23 UTC (2:23 p.m. local time). The crew was made up of French test pilots Jacques Rosay (captain for the take-off and the initial part of the test flight) and Claude Lelaie (captain for the second part of the test flight including the landing), as well as three flight test engineers (Spanish, French, and German), and one French test flight engineer. With the recent Franco-German controversy over the leadership of EADS still fresh in mind, Airbus issued a statement to make it clear that the crew had been chosen not based on nationality, but based on competence. Test flights are due to continue until mid-2006.

Civilian products

The Airbus product line started with the A300, the world's first twin-aisle, twin-engined aircraft. A shorter variant of the A300 is known as the A310. Building on its success, Airbus launched the A320 with its innovative fly-by-wire control system. The A320 was a great commercial success. The A318 and A319 are shorter derivatives with some of the latter under construction for the corporate biz-jet market (Airbus Corporate Jet). A stretched version is known as the A321 and is proving competitive with later models of the Boeing 737.

The longer range products, the twin-jet A330 and the four-jet A340, have efficient wings, enhanced by winglets. The Airbus A340-500 has an operating range of 13,921 kilometres (8,650 miles), the second longest range of any commercial jet after the Boeing 777-200LR (range of 17,446 km or 9420 nautical miles). These are competing strongly with the equivalent Boeing products and may partly explain the cessation of airliner production at Lockheed in 1983 and the take-over of McDonnell Douglas by the surviving US builder of long-distance airliners, Boeing, in 1996-1997. The company is particularly proud of its use of fly-by-wire technologies and the common cockpit and systems in use throughout the aircraft family, which make it much easier to train crew.

Military products

In January 1999 Airbus established a separate company, Airbus Military S.A.S., to undertake development and production of a turboprop powered military transport aircraft (the Airbus Military A400M.) The A400M is being developed by several NATO members, Belgium, France, Germany, Luxembourg, Spain, Turkey, and the UK, as an alternative to the C-130 Hercules. Expansion in the military aircraft market will reduce, but not negate, Airbus' exposure to the effects of cyclical downturns in civil aviation.

• Airbus A400M
• A310 MRTT (Multi Role Tanker Transport)
• A330 MRTT

Competition with Boeing

In 2003, for the first time in its 33-year history, Airbus delivered more jet-powered airliners than Boeing. Boeing states that the Boeing 777 has outsold its Airbus counterparts, which include the A340 family as well as the A330-300. The smaller A330-200 competes with the 767, outselling its Boeing counterpart, but it is speculated that the introduction of the 787 may improve Boeing's market share in this segment. The A380 is anticipated to further reduce sales of the Boeing 747, gaining Airbus a share of the market in very large aircraft.

Currently there are around 3,800 Airbus aircraft in service, with Airbus winning more than 50 per cent of aircraft orders in recent years. But Airbus products are still outnumbered 6 to 1 by in-service Boeings (there are over 4,000 Boeing 737s alone in service, for example). This however is indicative of historical success - Airbus made a late entry into the modern jet airliner market (1972 vs. 1958 for Boeing). Airbus won a greater share of orders and delivered more aircraft in 2003 and 2004.

At the aircraft show in Le Bourget in June 2005, Airbus outperformed Boeing in aeroplane sales. Airbus has contracted for the sale of 280 airliners with a contract price of 34 billion dollars, whereas Boeing received orders for 146 aeroplanes priced in total with 15 billion dollars.

Subsidies

Boeing has continually protested over "launch aid" for Airbus from the governments of the partner nations, while Airbus has argued that Boeing receives illegal subsidies through military and research contracts and tax breaks.

In July 2004. Harry Stonecipher (Boeing CEO) accused Airbus of abusing a 1992 non-binding agreement covering launch aid. Airbus is given launch aid from European governments with the money being paid back with interest, but only if the plane is a commercial success, and contends that this is fully compliant with the 1992 agreement and WTO rules. The agreement allows up to 33 per cent of the programme cost to be met through government loans which are to be fully repaid within 17 years with interest and royalties. These loans are held at a minimum interest rate equal to the cost of government borrowing plus 0.25%, which would be below market rates available to Airbus without government support. Airbus claims that since the signature of the EU-U.S. Agreement in 1992, it has repaid European governments more than U.S.$6.7 billion and that this is 40% more than it has received.

On the other hand Airbus argues that the pork barrel military contracts awarded to Boeing (the second largest U.S. defence contractor) are in effect a form of subsidy (see the Boeing KC-767 military contracting controversy). The significant U.S. government support of technology development via NASA also provides significant support to Boeing, as does the large tax breaks offered to Boeing which some claim are in violation of the 1992 agreement and WTO rules. In its recent products such as the 787, Boeing has also been offered substantial support from local and state governments.

In January 2005 the European Union and United States trade representatives, Peter Mandelson and Robert Zoellick (since replaced by Robert Portman) respectively, agreed to talks aimed at resolving the increasing tensions. These talks were not successful with the dispute becoming more acrimonious rather than approaching a settlement.

WTO litigation

On May 31, 2005 the United States filed a case against the European Union for providing allegedly illegal subsidies to Airbus. 24 hours later the European Union filed a complaint against the United States protesting support for Boeing.

Portman and Mandelson issued a joint statement stating: "We remain united in our determination that this dispute shall not affect our cooperation on wider bilateral and multilateral trade issues. We have worked together well so far, and intend to continue to do so."

Tensions increased by the support for the Airbus A380 have erupted into a potential trade war due to the upcoming launch of the Airbus A350. The A350 programme is to be launched with state aid and has the potential to spoil Boeing's most successful project in recent years, the 787 Dreamliner. However, if Airbus cannot obtain state aid, then their chances of spoiling Boeing's success will diminish greatly. Also, if state aid is removed, Airbus will find it very difficult to compete against Boeing, since Airbus will have to fund everything on its own.

EU trade officials are questioning the funding provided by the Japanese Government and Japanese companies for the launch of the 787.

Competition in Japan

The two large Japanese airlines, Japan Airlines and All Nippon Airways, are traditionally loyal Boeing customers, the manufacturer's products accounting for about 90% of their fleets. Both airlines have some Airbus products (A300 for JAL, not ordered by JAL but in the fleet because of the takeover of Japan Air System, and A320/A321 for All Nippon Airways).

However, ANA have started the transition to an all-Boeing fleet after the entry into service of 787 and 737 NG. Significantly, no orders have been taken for the A380 from Japanese airlines, despite the large 747 fleets operated in the country. Airbus has established a branch office in Japan in order to increase the sales efforts. In 2005, a success for Airbus is Sagawa Express' firm order of 1 A300-600F aircraft and 1 option of the same type.

International manufacturing presence

The two assembly plants of Airbus are in Toulouse, France and Hamburg, Germany.

Airbus, however, has a number of other plants in different European countries, reflecting its foundation as a consortium. An original solution to the problem of moving aircraft parts between the different factories and the assembly plants is the use of "Beluga" specially enlarged jets, capable of carrying entire sections of fuselage of Airbus aircraft. This solution is also being investigated by Boeing, who are considering producing an enlarged version of their 747 aircraft to transport the components of the 7E7. An exception to this scheme is the A380, whose fuselage and wings are too large for sections to be carried by the Beluga. Large A380 parts are brought by ship to Bordeaux, and then transported to the Toulouse assembly plant by a specially enlarged road.

North America is an important region to Airbus in terms of both aircraft sales and suppliers. 2,000 of the total of approximately 5,300 Airbus jetliners sold by Airbus around the world, representing every aircraft in its product line from the 107-seat A318 to the 565-passenger A380, are ordered by North American customers. US contractors supporting an estimated 120,000 jobs earned estimated $5.5 billion (2003) worth of business. For example, the A380 has 51% American content in terms of work share value.

Workforce by countries

(Data as of December 31, 2003)

Workforce by sites

(Data as of December 31, 2003)

¹ Name of the urban/metropolitan area appears first, then in parenthesis are the exact locations of the plants