Airbus Losing Altitude

Delays and engineering problems with the A380 are taking their toll.

Shares in European Aeronautic Defense & Space, the parent company of Airbus, plummeted Wednesday, wiping €5.5 billion off its market value, as a fresh delay in the delivery of the new double-decker A380 airplane raised questions about the company's management and strategy.

The continuing struggle between France and Germany for influence seems to have played a role.

EADS named Forgeard and a German, Thomas Enders, co-chief executives last July after a protracted struggle to preserve the balance of power between the company's largest French and German shareholders. The months of wrangling also delayed the naming of Forgeard's replacement at Airbus, Gustav Humbert, a German-born engineer.

It helps Boeing. I can even forgive Boeing for moving their headquarters to Chicago.

Boeing shares rose $4.21, or 5.5 percent, to $81.19 in afternoon trading in New York on Wednesday.

I'm apologize to any who may be offended, but I'm having a severe attack of schadenfreude. Given the current European attitudes and the gloating a year ago when Airbus overtook Boeing in aircraft sales, I think it excusable. Airbus is not just a company, it is the symbol of government subsidized industry in Europe, a company put together 36 years ago to take business from Boeing, Lockheed, and McDonnell Douglas for nationalistic European reasons, much as Galileo is being put together to challenge GPS. So screw 'em, I say. It's like shooting down a Messerschmitt, who was one of the companies involved in the original consortium. And after all, it's not as if the governments of Spain, France, and Germany will let Airbus go bankrupt.

There is a footnote to this tale.

The news comes amid revelations that Forgeard and his family and other top EADS managers sold off shares before Airbus announced the delays, which sent the company's stock tumbling and angered airlines worldwide.

But they aren't the only ones who sold stock in EADS.

Richard Aboulafia of the Teal Group has expressed concerns to the International Herald-Tribune (IHT) that the combined BAE, DaimlerChrysler, and Lagardere sales totaling 35% of EADS shares may create cash issues that would affect its ongoing ability to invest heavily in R&D. If true, this could be a critical weakness given its need to match Boeing's 777 and 787 aircraft in the market. Yet EADS' release noted that the company "was anticipating the possibility of such a move and is fully prepared to move ahead constructively." The IHT meanwhile, notes that the French, German and Spanish company has more than EUR 5 billion ($6.05 billion at current conversion) of cash on hand, and that many of these shares are likely to be floated on the open market. The exact structure of these deals remains to be seen.

Makes one wonder, no? Thanks to no pasaran, who has the latest entries in a story that I've been following for a while.