Brits Bail Out Of Airbus

Analysts are mystified that the Brit aerospace giant BAE is selling its 20% stake in Airbus. They shouldn’t be – there are excellent commercial, legal and humanitarian reasons for walking away.

BAE Systems is to raise more than £3 billion by selling its 20 per cent stake in Airbus to EADS, the Franco-German defence company which already owns 80 per cent of the aircraft maker.

The proceeds from the sale could be used for further acquisition opportunities in the US, the world’s biggest defence market, in which BAE Systems is now a major player.

The WSJ ($) explains the commercial justification:

For BAE, a sale of its Airbus stake would fatten its coffers to continue its recent string of acquisitions in the defense sector, especially in the U.S. BAE is by far the largest non-U.S supplier to the U.S. Department of Defense and a major player in the world’s largest defense market, particularly after its purchase of armored-vehicle producer United Defense Industries last year.

Exiting Airbus could also benefit BAE’s push into the U.S. by removing it from the bitter U.S.-European trade dispute between Boeing and Airbus over subsidies…By dissociating itself from the hot-button issue of alleged European subsidies to Airbus, BAE may defuse one potential political landmine on the path of its U.S expansion.

Next there are good legal reasons for dumping Airbus. Its engineers have taken risks to catch up with Boeing, and some have proved fatal – I avoid flying in their planes. So far, Airbus and its political supporters have been contained safety concerns. But when the first A380 goes down with 555 passengers, they’re toast.

From a humanitarian standpoint, dumping Airbus means that Brit engineers no longer have to suffer the torture of working in a Euro-consortium, and so will become happier and more productive. The nations in Euro-consortia insist on getting their nationally weighted slice of design – so the engineering is broken into national chunks rather than integrated. In engineering meetings, the parties follow their national stereotypes – the French behave abominably, the Germans boorishly, the Italians excitably, the Brits meekly, and so on. Every design decision is politicized, with behind-the-scene meetings and secret deals. This is a lousy and ulcer-inducing way to run a railroad.

Compared with that, dealing with Pentagon procurement and trial lawyers will be a dream, so good luck BAE!


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