Pontifications: Musical chairs at Airbus

By Scott Hamilton

Sept. 17, 2018, © Leeham News: The surprise resignation last week by Eric Schulz as Chief Commercial Officer for Airbus re-opened the door for the man who should have been named in the first place, Christian Scherer.

Scherer spent the last two years as CEO of ATR, which is 50% owned by Airbus, but his lineage is pure Airbus.

His father, Gunter, was one of the original Airbus pioneers. He was a flight engineer on the early A300B2 test flights when Airbus was formed. Gunter died in May.

Christian joined Airbus in 1984. Since then, he was Head of Contracts, Leasing Markets and Deputy Head of Sales as well as Head of Strategy and Future Programmes. At Airbus Defence and Space, he headed Marketing & Sales. He was named CEO of ATR in October 2016.

Passed over

Scherer was passed over for Schulz in January when legendary super-salesman John Leahy retired. The Board of Directors insisted on an outsider (which is what cost Leahy’s initial successor, his deputy Kiran Rao, the position). Even though Scherer hadn’t been at Airbus for more than a year at that point, the Board—reacting to scandals and federal investigations in the UK, France and Germany—insisted that someone not affiliated with Airbus succeed Leahy.

Schulz was an odd choice. Although coming from Rolls-Royce and certainly knowing the airline industry, he was a production guy, not a salesman. The Rolls-Royce name at the time was pretty much mud with many airlines operating the Trent 1000 on Boeing 787s. Technical issues grounded upwards of 50 787s and severely restricted operations on scores of others. Rolls and the 787s still have issues.

Lagging sales

Airbus sales have been lagging Boeing all year. The Farnborough Air Show in July was Schulz’ first opportunity to face off with Boeing at a high-profile international event and Boeing pretty much cleaned Airbus’ clock. All but a handful of Airbus’ announcements were MOUs and LOIs and scores were with unidentified airlines. (Boeing also had an unusually large number of unidentified customer announcements.) Few  of these to date have been converted to firm contracts.

But it was an internal power struggle that apparently cost Schulz his job. The squishy Farnborough deals should be firmed up by year-end, so this wasn’t the issue. Reuters reported that Schulz engaged in a power struggle with Airbus Commercial president Guillaume Faury and lost. LNC was told roughly the same thing.

Scherer’s return

Scherer’s appointment in 2016 as ATR CEO seemed to me at the time to be out of place, given his intricate background and responsibilities at Airbus up until then. The challenges were at Airbus, not ATR.

The turboprop manufacturer held 80% of the backlogs vs the ailing Bombardier and its Q400. Airbus blocked any effort to allow ATR to come out with a new generation, 90-seat turboprop to replace the aging ATR-42/72 design. Scherer favored a new design, but with Airbus holding 50% of the stock, it could and did block any move to create a new airplane.

Scherer’s position at ATR seemed to me to be a holding pattern. He did return ATR to the North American market (albeit in a freighter version only), where the Q400 held a monopoly. Even though ATR’s return was for the F model, it nevertheless was a decades-long desire to get back here.

With his return to Airbus, I look for momentum to return as well. This year has been at best a holding pattern as the transition from Leahy to his successor began.

Scherer has his work cut out for him.

The A330-800 so far is still born. The A330-900 is struggling. The A350-1000, a very good airplane, ironically may be too big as the industry re-sizes to smaller wide-bodies more akin to the size of the A350-900 and the 787-9/10.

There’s the question of how to deal with the prospect of a Boeing NMA. Does Airbus launch yet another sub-type of the A321neo in the form of the XLR? Does it go a step farther and launch the A321Plus? Does it wait for Boeing to launch the NMA or take a pre-emptive move?

As the former Head of Strategy and Future Programmes, Scherer’s experience will be important.

I look for good things at Airbus with his appointment. This is needed. This year has, so far, been quite underwhelming.

Eye catching email

I, like all my journalist peers, get loads of emails pitching this or that. Most have staid Subject Lines. Thus, it was one received last week that caused me to double take.

The sender was “Air G.A.N.G.” The subject line was “The G-Spot of Europe.”

“WTF” (not in an acronym) was my reaction.

The window pane preview showed “G.A.N.G” stood for Global Aviation Network Gathering, illustrated by a couple in Black Tie and formal Gown attire. Scrolling down took me to this embedded video:

Being the insatiably curious reporter I am, I clicked on it, which took me to a 15-second YouTube entitled Vilnius-the G-Spot of Europe. Watching the video is actually anti-climactic, but on the right hand side of the YouTube page displayed another G-Spot video with a man (ponder that for a moment). It was also promoting Vilnius.

The email was promoting the Air Convention conference in Vilnius next week. It was hands down the most stimulating email pitch for a conference I’ve ever seen.

 

45 Comments on “Pontifications: Musical chairs at Airbus

  1. My gut feel is that this could be good for AB. But a question, is this an interim move with Scherer earmarked to take over from Tom Enders?

  2. Any idea what the dynamic is like between Faury and Scherer? And what (if any) mid-long term effects does Schulz’s tenure look likely to have had?

  3. Maybe Christian Scherer placement with ATR was a calculated move. I’ve seen that a lot with big company’s. Crown princes placed as general manager positions of daughter companies for a few years to stream back in after a few years.

    • Definitely some grooming going on. Won’t be surprized if Enders is replaced by and acting CEO and Scherer takes over from the acting to become CEO.

      What about JL for acting 6 months?

      • One appreciates that, as someone has valuably pointed out, “experience is as to intensity, not to duration” – in other words, ten years in a job might only yield one year’s experience ten times over – and placements are all very well, but CS was only at ATR for about ten minutes and a short-stay park in JL’s old office is surely insufficient time before, with one leap, jumping into the corporate left-hand seat.
        That’s not to say he isn’t a future candidate – and perhaps before he’s 60. But I fear JL may not be seen as equally clearly by the Airbus Group suits as by you, even as a short-term seat-warming candidate.Right now Airbus Commercial needs as much stability and as steady an experienced corporate hand as possible.

      • The JL part of the comment was “tongue in the cheek”.

        CS has lots of challenges, the 787’s snow balling sales, possible NMA, market cold shouldering the 330NEO’s, etc.

        Can see both the 321XLR’s and 321+ happening as they will most likely use the same wing and integral additional tanks. The questions is when.

        From marketing I can see that many of the initial orders for these two aircraft could be conversions and not new orders which is a challenge of itself for the order books.

  4. Earlier up, Scherer drove the “New Products Strategy” function at Airbus and has tasted the thrill of scouting the future. May happen he will employ his augmented influence to leverage an acceleration to Airbus’ portfolio renewal ?

    • He most likley will ask for manufacturing prices for the A321LR, A321ULR, A321+ and a “Max’d out A322” and calculate the cost&time to set up a new FAL for the “special one” and the price/volume for the new “normal one”. The new FAL will most likley be a development from the latest A320 FAL in HAM with another step in robotization. The question will be if the Airbus board can get some goverment Money to set up the new FAL (like US tax breaks) and if the board dare before they have got firm data o what the 797 will do and cost. The engineers will say “do the best of the present design as Boeing will never meet its cost” the accountants want to wait and see firm Boeing sales and prices at Paris 2019 before moving forward.
      The top management might calculate that an early move by Airbus on an A322 will force Boeing to go ahead too early with a non-optimized design with a 45k PWA geared fan getting Boeing into all the troubles Airbus has lived thru but on a double scale.

      • An A32X with folding wing tips now and then raises it head and seems to be in advanced stages of study.

        Such a wing won’t be cheap and the devices adds weight, can also see such a wing having more application for longer haul (3500+Nm) routes. Why not then keep it simple with a “conventional” 40m-45m wing using CAT-D gates for an “A323” with 220-240 pax that can fly 4500-5000Nm?

        EIS could be around 2025 (?) as it will also require higher thrust engines, 4 wheel bogies, major fuselage strengthening, etc.

        By then aircraft currently using CAT-D gates would have significantly been reduced such as 757’s, 767’s, A300/310’s.

        Sure these are the type of thing Mr. Scherer will be looking into.

        • They need to make it cost effective, the new carbon wing box and carbon wing common for the A321neo+ and A322. Airbus might have the option to add another engine option to the A322 of approx 40k thrust. The key is how much more they can sell it for compared to the A321LR. I think for the A321+ not that much more as the A321neo is pretty versatile. The A322 is another story with 240-250pax and up to 5100nm taking over the old 767 routes, wing size will be determined of how much fuel the new wingbox will swallow and the rest in the new carbon wings that also will be sized due to available Engine thrust, 35k only and you need big slender wings for a low Vr. 40-43k and you are better off especially if they are a few % better SFC on the new/newer Engines.

          • Looks like an A321XLR (4500Nm) and 321+ (3500Nm) could most likely use the same updated version of the current wing, this wing could potentially also find it way onto an hypothetical 320+?

            An A322/323 will need a new (CFRP) wing and cost big money, cant see a big market (500-1000) for the 322/323, so cautious about the economics?

          • New wing ?

            Not so expensive if you use a close derivative of the A220 wing which even has its own production process and factory ready to increase production.
            You could even throw in a version of existing composite tail unit past the bulkhead but that is not as likely

          • The EU research programs has been paying some Money for the new carbon wingbox development and I assume the UK has put money for a new A321-class carbon wing and EU Money used for the laminar flow carbon wing sections tried out on the A340. Still it will cost to put everything learned together and certify it especially if they introduce a new 40k Engine. Airbus might want to give the wings and new Engine nacelles to Shorts/Bombardier. I Think serial produce the carbon wings from UK design will be plenty and the extra price charged for new Engines might be too much and they have to settle with present Engines at 35k in the present nacelle and its limitations. We will see if Engine selection on a aero optimized wing/body will be enough this time or they get one step behind again (like on the A380) when the 797 gets its Engines.

  5. Scott: Back when the Ak Pipeline was being built, they ran mandatory training on Arctic conditions (vast majority of the 20,000 on the project at any time) were from the lower 48 and all too many from Oklahoma and Texas (in AK opinion)

    The first training film on frostbite started out as a very racy dream, certainly had our undivided Attn until his alarm clock went off and he went out and got frost bit.

    I know we can’t do that in today’s world and its for the better, but they sure got a pretty much all male group attention.

    Someone had that nailed good. More thinking for training films would be a plus.

    • Judging by the list of tested recieving aircraft the oficially lower level problems with refuelling stealth types continues. USAF could end up dependant on RAF and RAAF support for a few years?

      • Keep in mind that the USAF has something like 500 tankers, two squadrons probably matches all the combined allied tankers available.

    • Unbelievable. First off, how is taking 370 people and their luggage this distance nonstop (Delhi to JFK), with proper fuel reserves, at all “smart”? It may be (barely?) legal, but is it an acceptable airline operation and “smart”? (Isn’t Singapore Airlines waiting on an ultra long range A350–with a much lesser passenger load—for its New York nonstop flights?) Aren’t the AI a/c pilots also pulling JFK weather before the flight, and along the way? And, what about all of the a/c instrument malfunctions on approach? What does that say, among other things, about Air India a/c maintenance?

    • This also made me wonder (from my instrument flight training of over ten years ago), could they not have been given a Ground Controlled Approach (GCA) at JFK, given the minimum fuel emergency situation? I know they’re archaic, but there may still be an FAA requirement to staff a GCA qualified controller or two at a JFK type major port of entry airport.

  6. According to Wikipedia Airbus sold ~150 A320/1’s this year while Boeing sold ~470 B737MAX’es. Could this be part of the Schulz leaving story?

    • I would not think so.

      How can you sell aircraft when you don’t have the slots?

      God knows how far out the orders Airbus has on the A320/1 (I like that way of putting it) and you only make 50 some a year? (right now)

      You can only do so much double booking and juggling.

      They were first out of the gate and got the orders (and flipped some Boeing adherents) and now there is a price to pay in order slowdown.

      That gets back to why this is an odd dance, unlike autos you can’t (as we clearly are seeing) just up production. Some very technicality advanced low production items just don’t lend themselves to that.

      60 of an item a month is not an assembly line operation, and most of it has little latitude for quality failures.

      Terms of sale being haggled over when you want more of it and the suppliers need to finance expansion and source reliable supply (and find people) of a low production item and no guarantees it won’t go South as it has in the past.

      And you have driven multiple sources out of the field because its less efficient. Except when its not (PW fan blades)

      Maybe its time to re-think things? Nah, just do the same old same o and hope.

  7. And for those who insist I only print scurrilous reports on RR

    http://aviationweek.com/commercial-aviation/rolls-reaffirms-a350-diversion-unrelated-trent-1000-issues

    It seems unrelated as its in the stator secion per AV Week if you don’t have an account.

    It does occurs to me rather than wait for incident it would be a good idea to mandate you pull engines off the wing and inspect regulatory as they are going into service.

    As these are given huge ETOPS limits even before they prove out, until there is a track record up to when engines would be pulled for overhaul that would give a good look at looming problems.

    Yes they would have to figure out good timelines and extra engines but long term it would be a far better system.

    • What do mean ‘even before they prove out’
      This is the reality… just for a ‘derivative engine’
      “Peter Johnston, Rolls-Royce v-p customers-Airbus, said the basic Trent 7000 certification flight-test program, which involved more than 1,400 flight hours in 250 flights performed by three A330neos,…
      then there is the ground testing..
      “Rolls-Royce is conducting a 3,000-cycle ground-test program …”

      https://www.ainonline.com/aviation-news/air-transport/2018-07-16/trent-7000-should-enter-service-330-minute-etops

      Other manufacturers would have similar testing.

      • Thanks, time will tell, but so far so good for the T7000. A big “fan” of the A332 as after many years I still spend 2 x 11 hour flights on one once a month on the same route for a monthly meeting.

        Hope the SFC’s of the T7000 etc. on the 338 will be above expectation, it will be a good niche aircraft.

        Could an A380NEO with T7000’s land up in Mr. CS inbox?

        • Maybe a leaf out the DC8 60 series book when they were re engined
          with CFM56 after being in service. But those were the days when such things could be done over 5 days at an airlines own engineering base – after certification of course.

        • Comparison of T900 vs T7000.

          Thrust: 70-77Klb vs 72 Klb,
          Weight: 6.3T vs 6.5T,
          Fan diameter: 116″ vs 112″,
          By pass ration: 8.6 vs 10.0

          No clue how much better the SFC will be?

        • Anton – “Could an A380NEO with T7000’s land up in Mr. CS inbox..?” Or does RR have in mind an UltraFan variant for that gig?
          Despite cosy single-source arrangements elsewhere, might not possible fear of a closer partnership between the two OEMs (and consequent loss of customer choice), especially given the CV of the most-recent CCO-chair occupant, have driven lessors/operators to demand a change of personality?

  8. And in P&W news a bit more info though not much on the vibration issue.

    http://aviationweek.com/commercial-aviation/vibration-issue-shakes-pratt-powered-a320neo-fleet

    It seems to be a bit overstated with so few A320, 14 replacements unexpected (for all reasons)

    Not that its good but its such a small data group and the other known issues look to be the majority of the replacements.

    I would like to see this engine succeed, P&W was the only one who was willing to explore that and put money into it and all the data says its the future.

    Hopefully like the PW4000, it turns into a reliable engine in the near and long term.

    • From my 35 odd years of experience, you can’t walk if you haven’t crawled, run if you haven’t walked.

      In my line of business where I spend a lot of time in rooms with long wooden tables I am glad I got my hands “dirty” and can make decisions because I know every employees work challenges and its importance to the company, because “I have been there”.

  9. If you actually read the piece, you will note he was at ATR for 2 years, has a large prior Airbus experience in Airbus Sales and Future Aircraft Development.

    He was short listed to number 1 before the board decided to go with an outsider with NO sales experience (in fact part of RR and that included the recent Bribe debacle)

    How good he is, I have not a clue. But he does have the kind of background you would want in the position if he is clean.

    “Christian joined Airbus in 1984. Since then, he was Head of Contracts, Leasing Markets and Deputy Head of Sales as well as Head of Strategy and Future Programmes. At Airbus Defence and Space, he headed Marketing & Sales. He was named CEO of ATR in “October 2016.

    • Deputy Head of Sales that is an interesting role.

      Do any Airbus watchers know who in the Airbus organization is responsible for managing foreign sales agents?

      Wonder why he wants to leave ATR. Sounds like he is a turboprop salesman at heart.

      • Nicholae:

        You really do not get he was number 2 to JL do you?

        I am not considered the biggest Airbus fan, but I sure see and respect his background.

      • Nicolae – ” Sounds like he is a turboprop salesman at heart.” Pourquoi? Actually it sounds more as if – to quote an old gag – ‘he’s got the foreman’s job at last…’
        Mind you, I have heard him wax lyrically about Open Rotors, which are (I suppose) turboprops.

    • Interesting, thanks for posting.

      Leahy is not a “touch act” to follow. He is an impossible act to follow. Very few in his league.

      I feel sorry for the turboprop guy even if he did have an opportunity to shadow JL.

      • I fail to see the label Turbo Prop guy. He got shunted off there for a couple of years while the entire rest of his career was a Airbus mainstream top end exec, and a JL staff member.

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