THE BIG INTERVIEW: Guillaume Faury, CEO of Airbus, on point-to-point and the A380's unfolding role

AVB sits down with Airbus CEO Guillaume Faury in Paris to discuss how the company is adjusting to global and regional trends, while at the same time, trying to push industry-wide development.
Guillaume Faury, CEO, Airbus.
Guillaume Faury, CEO, Airbus.

Airbus has been thrust into the headlines over the last 12 months as it has found itself being sucked into global debates surrounding trade tariffs and climate change.

International commerce wars, increasing pressure from environmental groups and regulatory changes have made CEO Guillaume Faury’s first months at the helm difficult ones to navigate. Nevertheless, since taking over in April, he has not lost focus on the path Airbus is trying to carve out for the future of aviation. Not least on Faury’s ‘to-do list’ is adapting to the shifting Middle East market, where airlines are showing signs of changing their habits.

A number of large players in the Middle East region are revisiting their order structures because of decreasing oil prices, which impacts long-term demand. With some long-term customers potentially adjusting their forecasts, how is Airbus handling customer relationships?

Faury shakes off any notions that the manufacturer is having to change the way it works with its partners. Long-term forecasts are not necessarily having an impact on the short-term relationship between Airbus and its customers when it comes to contract execution, he states.

Aviation is increasingly seeing automated manufacturing processes, similar to the car industry.

Aviation is increasingly seeing automated manufacturing processes, similar to the car industry.

“The fact that we have long-term relationships means that in this industry there is a behaviour between players, between partners, between suppliers and customers, which has to be reliable. There are a limited number of airlines and original equipment manufacturers, so it is a relationship that is based on trust and on trying to find common solutions when there are issues.

When we are in an environment, as it is the case now, which is moving forward very quickly, we spend a lot of time trying to find a solution for the future. That is why some negotiations take a long time. There are a lot of things that need to be managed and when the environment is very dynamic we want to make sure that the contracts and the structure are robust to change.”

Emirates is one carrier that has found a model to make the A380 profitable.

Emirates is one carrier that has found a model to make the A380 profitable.

While negotiations with regional airlines can prove tricky in the current climate, in the Middle East, Airbus is enjoying a purple patch on its commercial side. Despite increased spending on defence in the region – estimated to reach $100 billion this year – commercial airlines still form the bedrock of Airbus’ business in the area.

Growth for its commercial division has been “much faster” than defence, Faury says. He predicts that commercial aviation in the Middle East will continue to swell significantly despite rising tensions between nations and regional conflicts. Faury is confident in people’s appetite to travel and their demand for connectivity. He notes: “We think the size of commercial aviation for Airbus and for the majority of players will continue to be much larger than defence.”

Max troubles ‘of no benefit’

Among the most seismic events in the aviation industry in recent months were the two Boeing 737 Max crashes, which killed 346 people. The grounding of the Max has bitten Boeing hard and on the face of it, observers would fairly assume that Airbus might have experienced an uptake since the tragic incidents.

However, the fallout from the Max controversy has not benefited Airbus, Faury insists. He says that demand in the single-aisle segment always was very strong before the Max incident and remains “very strong”. Faury comments: “In the short-term there is no way for us to take any benefit from the [Max] situation. We stick with the commitment we have made to our customers.

"We have our own trajectory and these uncertainties, the situation of the authorities having to manage a complex situation with the Max, is something that is not helping the industry and obviously not helping us. In the long-term it might be different, but in the short-term, in the last six months, there has been nothing positive.”

The A350 is a key part of Airbus’ strategy to cater for the growing trend for point-to-point aircraft.

On top of the repercussions for aircraft regulations caused by the Max incidents, Airbus has faced the sharp end of escalating trade wars between the European Union and the US. Not necessarily out of choice, Airbus has found itself drawn into the tit-for-tat spat.

With President Trump’s 10% levy on Airbus aircraft, it is now likely that the EU will respond with its own tax on Boeing planes. While Faury notes that the saga is out of Airbus’ control, he believes the company’s weight can “influence” the outcome.             

“I think there is a big misunderstanding on how the aviation supply chain works. We have spent a lot of time and energy speaking to our many, many partners, be they in politics, in the States, suppliers, the US industry or airlines, to make sure there is not a simplistic view of ‘EU against the US’, but a deep understanding of the interdependency of the supply chain.

"I would like to remind [the sector] that 40% of what we buy on an Airbus [plane] comes from the US. We procure from the US, we manufacture in the US and we deliver in the US. We need a global, open trade scheme for aviation; that is the way it works and the day we stop it we will destroy value for all players.

"Raising the tariffs on both sides of the Atlantic will be lose-lose for everybody. What we are trying to achieve is both the US and the EU coming to the table to negotiate and find a settlement before it impacts aviation, travel, industries and jobs.”  

Point-to-point demand

Given the calibre of its carriers, the Middle East is always a strong focus for Airbus and it keeps a close eye on buying habits in the region. Despite announcing the cessation of A380 production, Airbus has found that the superjumbo remains a key focus for regional airlines, with the likes of Emirates finding ways to operate the aircraft profitably.

Faury knows the importance of fuel efficiency and the struggles of four-engine planes, but remains fond of the A380. He believes the plane has decades of potential left for companies like Emirates, who can make a business case for it. In fact, a number of customers have chosen to extend the lives of their A380s, with Qantas deciding to completely overhaul the cabins on 12 of the models.

The Middle East’s smaller carriers, and particularly its up-and-coming airlines, will not mourn the loss of the A380 as perhaps some of the national flag carriers have. What the cancellation of the A380 means for the region’s operators is that Airbus now has significant additional production capacity. And for Faury, that means developing aircraft designed for point-to-point travel.

Airbus' A319neo. 

He explains: “For many players it makes sense to do more point-to-point. And when it comes to point-to-point long distance or even very long distance, the A350 is a very good answer. Or even for thin routes, the A321 XLR is a game-changer because there are economical rules that are now viable because you have a small capacity that can go very long distance.

"The feeling I have as an observer of the market is that new planes and the point-to-point requirements are enabling [aircraft] to go down in size but travel at higher frequencies.”

The exception to this trend, Faury notes, could be very large planes flying into London. With such limited slots available, he predicts that the A380 will continue to play a significant role in London-bound flights in decades to come, perhaps even more so than today. And while the sun is setting on the A380, Faury does not think that the industry is scared of investing in largescale projects on the same scale as the superjumbo.   

In fact, Faury sees the opposite: “There is a lot of investment in new technologies. The A350 has had success very quickly and is gaining momentum. It is the same with the new versions of the A320. The neo has been very successful and we have seen a massive shift from ceo to neo because of its better fuel burn.

"We are introducing the XLR and we have seen immediate success with the A220. It is fair to say that there has been a lot of continuity in aviation, sometimes at a fast pace. But we are seeing maybe more disruptions than we have had in the last 50 years going from fossil fuels to new energies in the next 20 years, connected planes, single pilot operations or flights without pilots. These are going to come, these are big disruptions.”

Faury wants Airbus to be at the centre of market disruptions and is gearing its research and development strategy accordingly. He identifies three broad areas the company is investing in. The first is the potential of automation in production systems and the move towards greater industrialisation, similar to the automotive sector. Airbus recently opened a new hangar in Hamburg which has a highly automated production area as a means of capitalising on the trend.

The second area of “transformation”, Faury says, is digitalisation. Airbus has invested in a number of initiatives, including what it calls ‘Digital Design Manufacturing and Services’. It means digitising the plane, the production system and service in one unique package. The third focus is decarbonisation. Decarbonisation will follow on from automation and digitalisation in terms of products and services, but remains a priority in Airbus’ R&D.  

Faury appears intent on exploring and investing in uncharted segments, despite the unpredictable and fast-changing market. Perhaps his strategy spawns from necessity. Customers in the Middle East and indeed globally demand that suppliers continue to innovate so operators can diversify and tackle their own hurdles.

As long as Airbus continues to cater for its customers’ needs and market trends then external pressures like trade spats and international politics will struggle to prevent it from paving a way for the development of the global aviation industry. And that, operators will agree, can only be a good thing for the sector.

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