The Paris Air Show is a nice morale-booster for Airbus S.A.S. The French-German aerospace firm has already trumpeted orders for more than 560 of its aircraft, with a total face value of €95 billion (Rs5.23 trillion), still counting. At least the customers believe the planes can fly, and they seem to be confident that Airbus can finally deliver them on time.
The order books may be fattening, but shares of Airbus’ parent company EADS N.V. (European Aeronautic Defence and Space Company) haven’t moved. One reason may be that some of those new orders aren’t really new. Another may be that some aren’t even orders yet—about a third are simply intentions to buy. Yet another may be that the face value of the planes will only partially translate to topline growth, as Airbus had to offer deep discounts to overcome the serious industrial crisis it encountered last year with delays in its double-decker A380 programme.
Still, Airbus is obviously benefiting from the boom in air travel and the subsequent rush by airlines to expand or renew their fleets. But beyond this week’s bonanza, Airbus’ two major problems remain unchanged.
First, what Airbus’ management misleadingly calls the dollar issue. Airbus makes its planes in the euro zone and sells them in dollars. Ten euro cents down on the greenback costs the company €1 billion. So Airbus’ woes have worsened as the dollar has weakened in the past year. But the problem doesn’t lie with European Central Bank president Jean-Claude’s interest rates policy. The heart of the matter is that Airbus has to find a way to outsource part of its production capacities to lower-wage, dollar-dominated countries.
The weak dollar will continue hurting until it decides to do so. The reason it doesn’t, is the company’s second underlying problem: a shareholder structure that balances German and French interests to the point of absurdity. Nothing has changed, despite last year’s debacle. Record orders won’t amount to much until France and Germany allow Airbus to operate as a normal company.