Summary
EADS and Airbus can't go on the way they are today. When the sole remaining tangible asset a company has is its cash reserves -- and your major shareholders won't even let you use them -- then you're in deep trouble. That's the EADS picture today, pure and simple.
Analysis
If life begins at 40, then Airbus should have been in good shape when it recently 'celebrated' the 40th anniversary of its political-test-tube birth, but life-support for the aircraft manufacturer began even before its European gestation in the late-1960s. Today, you'd have to be a paid-up Airbus sympathiser or to be bulk-buying your la-vie-est-rose-tinted spectacles not to realise Airbus is in anything but dire straits, whether it's aged 40 or not.
As is so often the case, however, it's not the principal party that suffers most. Like French yogurt-manufacturer Danone before it, Airbus has been declared a strategic asset by the French government (good grief, wonder how they define a strategic liability?), which basically means it won't be allowed to fail.
Funny, Airbus isn't just French yet the French government has rushed in to protect it. Commercial imperialsim: don't ya just love it?
Anyway, if it's not the OEM, it's the supply chain that suffers. Thales, Magellan, Diehl, MTU, Stork, Gamesa, GKN, Precision Castparts, Saab and Smiths are only a random selection of the 400+ larger global players in the A380 supply chain for whom this struggling aircraft is an ongoing financial disappointment, with its delays and low-low-rate production (only 15 aircraft delivered to date, 19 months after service entry; that's a revenue trickle, not a revenue stream).
Add in such Tier 1s as Hexcel, Goodrich, Eaton, Honeywell, IHI, P&WC and Rockwell Collins (there are many more, including of course engine suppliers) and it's clear the fall-out is supply chain-wide.
Each of these subcontractors, suppliers and integrators is already hexed by its exposure to or involvement with the delayed, hugely over-budget and financially ruinous Airbus A380 and A350XWB programmes, and if they're really unlucky they are also in a prime position on the wingless albatross, the A400M.
These three Airbus widebody failures are mismanaged from France and are dragging down European and international supply chains with them. This is a fact which large sections of the industry in Europe in particular have been bemoaning for several years now.
And where the A380 has slowly gone, the A400M is going too as is the much-delayed and multi-relaunched A350.
On the plus side, Airbus has what? Narrowbodies, for which it says it is cutting production 5.6% in October (from 36 to 34 aircraft per month, it misleadingly claims as the 12-month rolling average Airbus narrowbody production rate to end-May 2009 is already only 32.4 per month), and it is crystal clear Airbus is hurting the industry's supply chains at a time when Boeing is closing in on the biggest production ramp-up in history with the 787 and 747-8.
The future for Airbus (and EADS) is political, not commercial. Airbus cannot fight its way out of the deep financial hole it's in due to the past five years' management fiascos so EADS needs a large injection of funds if it is to continue in business (hence current preparations to tap European governments yet again for new-aircraft launch aid).
At one stage not long ago major industry players in Russia and the Middle East were queuing up to invest in EADS. Not any more. The queues today might look the same, but they're actually pointed in the opposite direction.
Only the French government is on EADS' side now (the German government's role in the OEM is a reluctant one whose only purpose is to keep rampant French nationalism in check. How ironic.).
Airbus will undoubtedly be all smiles as usual at the upcoming Paris Air Show (a government sugar daddy will do that for you), but look beyond the surface and you'll clearly see the tears of a clown. They might not announce any more bad news this month, but that won't change the dismal outlook.
