Friday, December 15, 2017

Airbus Upheaval Triggers Search for New Chief Executive Officer: Departures come amid turmoil at the world’s No. 2 plane maker

The first copy for test of the 200 medium-haul Airbus A320neo passenger plane leaving its hangar in Saint-Martin-du-Touch, near Toulouse, southern France in 2014.

The Wall Street Journal
By Robert Wall
December 15, 2017 2:58 a.m. ET

Airbus SE is hunting for a new chief executive to steer it through some of its worst turbulence in years.

The plane maker is facing investigations around the world over alleged corruption at a time when many of its most senior executives have laid plans to depart or already exited. While Airbus has secured orders for jets that have lengthened its backlog for years, it and rival Boeing Co. face big production challenges—including tight supply lines—to deliver those planes.

Airbus on Friday confirmed Chief Executive Tom Enders wouldn’t seek an extension to his contract beyond April 2019. His No. 2, Chief Operating Officer Fabrice Brégier, who runs the commercial plane division that delivers most of Airbus’s revenue and profit, will leave in February.

Airbus, the world’s No. 2 plane maker by plane deliveries behind Boeing, said it would consider internal and external candidates to replace Mr. Enders. A new CEO is due to be named “in good time” for confirmation in 2019, it said.

The exits come as Airbus confronts corruption allegations and other regulatory scrutiny in countries including the U.S., France, U.K. and Germany. The company is being investigated for allegedly paying bribes in some countries, including in Saudi Arabia, and for failing to provide governments mandatory disclosures about the use of outside middle men to win commercial plane and defense contracts. Last month, French authorities raided Airbus offices as part of an investigation into business the company conducted in Kazakhstan.

In Austria, Mr. Enders is among several Airbus officials being investigated about alleged wrongdoing in a combat jet deal more than a decade ago. Mr. Enders has said the allegations in Austria were unsubstantiated.

Airbus has said it is cooperating with the probes.

The company also faced the biggest turnover in years among its top executives, many of whom helped steer it for decades in its battle with Boeing. The company’s hugely successful chief salesman, John Leahy, is retiring, while its head of engineering, strategy boss and chief technology officer have left. Other top executives at the plane maker are nearing retirement, with no clear succession in place.

Boeing over the past 18 months has rebuilt its top ranks after Dennis Muilenburg took over as chief executive.

Airbus Chairman Denis Ranque said the latest changes would allow for “orderly succession planning.”

The turmoil has cast a shadow over a company that has enjoyed years of record orders. Airbus has a backlog of planes that represents more than eight years of production. It is boosting output and expects cash flow, after a period of investment into new plane models, to improve in coming years. Among its biggest headaches has been how to manage supplier bottlenecks to satisfy demand.

Airbus Chief Executive Tom Enders at a ceremony during the delivery of the new A380 aircraft to Singapore Airlines at the company’s French headquarters near Toulouse on December 13.

Mr. Enders’s exit will draw a line under an aerospace industry career that began in 1991 and saw him rise through the ranks of the German and then European aerospace industry. He helped Airbus launch the A320neo single-aisle program that quickly became the company’s best seller. But Mr. Enders’s path also has been marked by multiple setbacks.

Mr. Enders first was named co-CEO for Airbus—then called European Aeronautic Defence & Space Co.—before being moved to run the aircraft division in 2007 as part of an executive reshuffle to streamline the company’s complex management arrangement.

Airbus for years was a political entity as much as an aerospace company, with politicians trying to call the shots on personnel appointments and investment decisions. Mr. Enders sought to reduce the political influence and turn Airbus into what he called “a normal company.”

In the wake of a failed merger attempt with British defense company BAE Systems PLC in 2012, which the German government opposed after Mr. Enders couldn’t convince Berlin of the benefits of the deal, the chief executive restructured the company to reduce the influence of government shareholders.

But political divisions became apparent again this year amid compliance problems and internal strife. The company in 2012 undertook a compliance review after concerns were raised about the company’s conduct in a combat aircraft deal in Austria and on a satellite communications contract in Saudi Arabia. Even so, new missteps came to light in 2016 and 2017 when the company admitted the unauthorized use of middle men.

The new CEO also will inherit problems with two of Airbus’s highest-profile plane programs. The A380 superjumbo has been losing money for years and struggled to win orders. The A400M military transport plane program is deep in the red.

“In the coming 16 months, I will work with the board to ensure a smooth transition to the next CEO and a new generation of leaders,” Mr. Enders said Friday.

Mr.  Brégier, who will be replaced as head of the plane making unit the company’s helicopter boss, Guillaume Faury, is well regarded in the industry for successfully overseeing several big-ticket projects including the relatively smooth development and start of service of the A350 wide-body plane. He also helped lead a far-reaching cost-cutting effort and managed the steep boost in production in recent years that is expected to lead to record output in 2017.

“They are losing one of the most respected leaders in aerospace,” said Eric Bernardini, managing director at consulting firm AlixPartners LLP.

Original article can be found here ➤

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