| by admin | No comments

Why Project Fail in Airbus-A380

WHY PROJECT FAIL IN AIRBUS-A380 17

WhyProject Fail in Airbus-A380

Applyrelevant theory to analyze ““

Executivesummary

Airbus,the iconic European corporation has in the recent past undergonethrough a turbulent era owing to the problems that surrounded theAirbus A 380 Project. Back in the year 2000, Airbus embarked on oneof its most ambitious project, the Airbus A 380, an aircraft that wasdesigned to steer the coming in of a new era that would be marked bysuper jumbo jets, that could carry a maximum of 853 passengers(Schaub2010, pp 45).In this study, much emphasis will be put on at the problemssurrounding the Airbus A380 project and how they have gone on toaffect the financial strengths of the Airbus. Moreover, the studywill focus on the effect the failure by the Airbus 380 aircrafts onQantas airline, with a focus on how it affected the airline’sbusiness. The literature review will focus on different styles ofcorporate governance and the effectiveness of governance in crisissituations. On the theory of stakeholders and retail coordination,the study will focus on Airbus’s stakeholders move to havedominance on the aircraft market and how their orders were receivedby their customers following the delay in the competition of the muchwaited A380 aircraft. The study will further employ the use of aqualitative method of data analysis. Finally in the conclusion, thestudy will highlight the measures taken by Airbus to correct thesituation and offer further directions for future research.

TheMaking of commercial aircraft industry is one of the most cutthroatindustries experiencing a cutthroat competition between the differentairlines, all in the business of attracting more customers. Industryconsolidation in this sector has led to the creation of two mainplayers in the world, being the Boeing in them U.S and Airbus ofEurope (Pandey2010, pp 245).As such, the two major industry players have led to the existence ofa duopoly with the leadership in the commercial aircraft marketrotating between these two corporations.

Airbushave for a long time been a global pacesetter in the manufacturing ofcommercial aircrafts. As such, the coming in of the Airbus A380 wasprojected to be a huge achievement and would go along towardselevating it into a whole new level of market domination (Aboulafia2000, pp 20). However, delays in production combined with the thecancellation of some of the jet’s orders by some customers put thecompany into a complicated business situation (Maxwell,2007, pp 85). Other problems that were associated with the airline problemsfurther included workforce discontentment, delivery delays, areduction in production activities, as well as customers’dissatisfaction. In view of these, this research will put muchemphasis on the problems surrounding the Airbus A380 project and howthey have gone on to affect the financial strengths

LiteratureReview

Managersin any organization are tasked with the responsibility of amplifyingthe value of the company’s shareholders assets. As such, the boardof directors in organizations is part and parcel of the corporategovernance structure and supervises the performance of managers aswell as providing a strategic direction that the company should take(Adams2009 pp,58).In this line managers employ several methods in evaluating thepotential success of any project being undertaken. To examine theProject Fail in Airbus-A380, the research will focus on twoapproaches being the organizational structure of the company and thegovernance and leadership systems present (Williams, Haka &ampBettner 2005, pp 65)

.

Corporateleadership

Thecorporate culture, governance in addition to leadership of anycompany greatly influences the success of a business with thedifferent leadership characteristics needed for organizationalsuccess. This is especially relevant to an organization the magnitudeof Airbus, which highly depends on the originality and the novelty ofits personnel (Loveless,2010, pp 10).A leadership and governance characteristic that is relevant to theAirbus include leadership advancement, teamwork, succession andtransformative leadership skills that are necessary to guidingorganizations through a crisis (Airbusindustrie 2006, pp 66).This means that some leadership deficiencies could have contributedto the tribulations experienced at airbus, which had a negativeimpact on the company’s organizational efficiency.

Corporateand governance structure

Afocus on the organizational structure of an organization shows thatthe manner in which the company’s directors coordinate theperformance of high level management, with their communication toshareholders going along towards enhancing a successful governancestructure (MacPherson &amp Pritchard 2003, pp 221). In such ascenario, the board is mandated to monitor the activities of toplevel management as well as revising their activities whenever theirperformance o not go in line with the strategic direction of thecompany. The board is also tasked with monitoring the activities ofthe CEO and can indulge whenever they see that the organization isn’tmoving in the envisioned direction before further damage happens(Leary1995, 212).Additionally, the governance structure of Airbus is in affected bypolitical interference coming from shareholders in the government onthe basis of self interests by countries like Germany, France, Spainand the UK (Millichamp 20007, pp 789). Political inferences of suchchoices need to be considered, with Airbus management tasked withascertaining how they tackled the A 380 crisis that led to furtherloss of money as the company awaited for political approvals toimplement the necessary measures.

It’simportant to note that by the time the Airbus crisis hit, the companyhad 2 co-CEO’s and 2 co-chairpersons to the board that wereselected by diverse groups. Apart from the view that one of thechairmen heads Airbus, a separation of the responsibilities in thedecision making process is unclear (Norris&amp Wagner 2010, pp 89).This in the long run affects the responsiveness of the organizationwhen it comes to decision making, and more so during a crisis.Additionally, the company has only two independent directors in aboard that is consisted of 10 members (Kemp,2007, 99 521).This leaves the remaining 8 members, who are usually appointed on thebasis of geo- political influences. This means that one of thedirector’s aim of making sure the management remains focused onmaximizing the shareholders wealth is shrouded by other vestedinterests.

Reasonslead to failure, Classic mistakes

Classicmistakes in implementation of projects in organizations often come inthe shape of poorly made decisions. Decision making in variousprojects go along into shaping the outcome and success of a givenproject (Barrie 2007, pp. 47). Whenever a project ends up in a mess,it’s usually the consequence of the intermingling of various poordecisions made. Occasionally, just like the A380 project, a singleisolatable decision is mainly the source of the problem.

Asthe globes largest commercial aero plane, A380 is the most complexaero plane in the airline industry today. Though the aero plane hasnow been in operation for six years, the project preceding thisexceptional aircraft had its own fare of challenges. The aircraftoriginally planned for its release in 2006, its entry into the airservice was further delayed by nearly two years, with the projectbeing a number of billion dollars in excess of the planned budget(Johnson,2011, pp 109). At the heart of all the problems was the evident difficulty in theintegrating of the intricate wiring structure that was required toconnect the aircraft with metal airframe through which the wholewiring works needed to thread (O’Neal 2012, pp 42). Additionally,the fact that the diverse designers that were running the project hademployed diverse computer aided design software necessary in creatingthe engineering drawings.

Moreover,the making of the A380 aircraft was collaboration among 16 sites thatwere stretched across 4 diverse countries. In this arrangement, boththe Spanish and German designers used one version of the software(CATIA version 4), while on the other hand the French and Britishteams had already upgraded to version 5 (Bartsch2012 pp. 108).In view of this, it’s worth noting that the CATIA version 5 was acomplete rewrite but not an improved form of version 4. This meantthat caaalcualations were inconsistent across the different versionsof the software, hence leading to huge mess of the whole project.

Inview of the above, all these problems can be traced back to onesingle decision being the decision to allow the going ahead of theproject despite the fact that different computer aided designssoftwares were in use (Holmes 2007 pp 102). As such the decisionbrought about the coming up of design inconsistencies that werecharacterized by mismatched calculations and failures inconfiguration management.

Impactof Project Fail in Airbus-A380 on Qantas airways

Thefailure of the Airbus A380 project to launch successfully also had asignificant impact on Qantas airways (Ott 2007, pp 102). Thisfollowed the economic losses experienced by Qantas airways aftergrounding six Airbus A380 jets after an engine on one of the aircraftblew apart in a flight. Though the other three engines went onoperating properly, they emitted fuel for more than one hour as asafety measure before it finally landed (Gregory &amp Glance,2013, pp 78).The striking nature of the engine failure in addition to the highstatus of this globe’s largest passenger jet sparked a frenzy ofattention which further affected Qantas airways operations due to theimmense scrutiny. In this incidence, Qantas resulted to suspendingall A380 aircrafts flights even before the investigators gave theirpreliminary conclusions on the technical hitch. This was partiallybecause the aero plane’s own maintenance as well as operatingsafeguards has in the recent past been criticized by the Australianregulators (Best 2005 pp. 10). As such, the added security scare thatcame with the A380 aircrafts only served to further affect theirbusiness hence proving to be counterproductive for the airline.

Thescrutiny was further directed to Rolls Royce, the manufactures of theTrent 900 engines used in the Airbus A380 aircrafts with questionsbegging to the company’s engines designs and reliability issuesthat affect the engines which it supplies to other jetliners(Power-waters2005, pp 452).However, Roll Royce manufactures have since then urged airlines toconduct their own basic precautionary engine checks on all A380aircrafts though the company still maintains Qantas airline’sengines.

Theoryof Stakeholders

Ina bid to put an end to conflicts that occurred with the moreinformal, independent and geographically dispersed organization, thecompany also came up with a new administrative structure (Sparaco2004, pp 42). Instead of realizing the projected benefits with thenew structure in administration, the system endangered the verysurvival of the corporation which served as a catalyst for awholesome restructuring of the company starting from the managementat the top down to those in the production lines (Dubrin 2007, pp12).

Inview of the above, several studies have been conducted to ascertainthe reasons behind the fall of the Airbus A380 project and documentwhat went wrong in the whole project (Tong 2003 pp 28). According tosome of the various studies conducted in a bid to get the root causeof this problem, some argue that the failure was not attributable toany technical hitch or even to its project managers. The problem inmost of the studies have led to the conclusion that the problem wasmuch larger and hence placed the blame on top level management(Collinson,2011, pp 40).The delay in launching the Airbus A380 created significant concernsbetween Airbus stakeholders, as well as, the international businesscommunity.

Discussion

TheA380 aero plane was always going to be the largest aero plane everfollowing its completion. The aircraft was destined to herald a newsegment in Airbus aircrafts by having a foothold in the ever changingmarket needs, with the jamming at airports being one of them(Deutscheairbus 1991, pp 87). The project went ahead to take 5 years of foundation developmentsand testing costing the company over 600 million dollars. Furthermorethe foundation cost was projected to be 10 billion dollars, with atax bonus of 3 billion euros in Europe only, hence in the processinduce a worldwide employment creation of over 200,000 jobs.( Endres2001, pp 66)

Withsuch a project in place, Airbus was always going to give Airbus agrip in all commercial aero planes market segments that was meant toface up to its main competitor Boeing by surpassing the 500 passengercarrier aircrafts as well (Willie 2007 pp13).

Beforethe developing of the A380 airplane, Airbus had projected that due tothe increased number of long distance flights as well as the swell inthe fees paid by airlines per landing, it was only rational for theairline to build a double deck, huge capacity airplane (Hartley,2001, pp 85). With such an aircraft, the company could be well placedto minimize its operating costs especially on long haul flights. Thefirst orders for the airplanes planes were received in 2001 from theEmirates Airlines, for 7 airplanes. In this line, further ordersfollowed with the corporation seemingly headed on a successful pathin attracting new customers (Wall 2006, pp 95).

Ina bid to exact its dominance in the market, Airbus had to fulfill itsconveying and manufacturing requirements to its customers. However,that did not take place, with the company in 2005 announcing that dueto technical challenges attributable to internal wiring in theaircraft, there would be delays in the launching of the aircraft. Thedelay was initially set to take 6 months but was further pushed byanother six months (Hampton,2009, pp 56).This caused shifts in its delivery timetable with the corporationincapable to supply the pledged number of airplanes in time. Thedelays led the fall in the share price of Airbus Company by 26% (Wall2007, pp35). This further saw its customers begin to express theirdissatisfaction with some cancelling their agreements with Airbus andchoose to take orders from its rival, Boeing. However, Airbus workedtowards correcting this mess by setting a research group to analyzethe problems in a bid to find a way out of the crisis. With thecompletion of its internal review, Airbus’ crisis research groupresolved that extended delays in the manufacturer were unavoidablehence in 2006 the company was able to conduct its first flight testof the A380 aircraft.

Methodology

TheA380 airplane has been a chief project at Airbus for the past fewyears and in the process taking considerable arrangements andinvestments that amounted momentous annual expenditures. The majorpush of our study will be quantitative for aspects where we shall gethold of the managerial data required to do the analysis (Gummesson,2006. Pp 167). We shall also employ a qualitative methodology toassess the leadership and managerial structure at Airbus.

Conclusion

Inview of the information got from the study it’s feasible to saythat the replication of manufacturing components does not allowAirbus to take advantage of its size coupled with the lack ofharmonization of energies between the units that have led toineffectiveness (Whaley 2007, pp 9). The unproductiveness is mostlydue to governmental intrusion and rigid leadership and managerialstructure of Airbus has overall negative impact on the company. Thismeans that Airbus should work tirelessly towards addressing theseissues, with a restructuring needed to alleviate these problems.

Bibliography

Aboulafia,R., (2000) “The Airbus government funding question.”, AmericanInstitute of Aeronautics &amp Astronautics,38 Issue, , p20.

Adams,S. (2009).&nbspFundamentalsof business economics.Oxford, Elsevier.&nbsp

AIrbusindustrie. (2006).&nbspA380technical review. issue 2, June 2006. issue 2, June 2006.Blagnac, France, Airbus S.A.S.

Barrie,D., (2007) “Power Irate: British government and Airbus attemptfence mending exercise British government, Airbus and EADS strivefor rapport in light of restructuring,”, AviationWeek &amp Space Technology,, p43

Bartsch,R. I. C. (2012).&nbspInternationalaviation law: a practical guide.Farnham, Surrey, Ashgate Pub.

Best,R.J., (2005), Market-Based Management, Pearson EducationInternational.

BoederTL &amp Dorman GJ,(2000) “The Boeing/McDonnell Douglas merger: Theeconomics, antitrust law and politics of the aerospace industry”,AntitrustBulletin,1, p119

Brealey,R.A., Mayers, S.C. &amp Allen, F., (2006), Corporate Finance,McGraw-Hill International Edition.

Collinson,R. P. G. (2011).&nbspIntroductionto avionics systems.Dordrecht, Springer.&nbsp

Deutscheairbus GMBH. (1991).&nbspDeutscheAirbus.Hamburg, Deutsche Airbus.

Dubrin,A., (2007), Leadership: Research Findings, Practice and Skills,Houghton Mifflin Company.

Endres,G. G. (2001).&nbspTheillustrated directory of modern commercial aircraft.Osceola (Wis.), MBI Pub.Co.

Gregory,M. A., &amp Glance, D. (2013).&nbspSecurityand the Networked Society.Cham, Imprint: Springer.

Gunston,B. (2009).&nbspAirbus:the complete story.Sparkford, Yeovil, Somerset, Haynes Pub.

Hampton,J. J. (2009).&nbspFundamentalsof enterprise risk management how top companies assess risk, manageexposures, and seize opportunities.New York, American Management Association.

Hartley,R. F, (2001), “Marketing mistakes and successes”, Journal ofBusiness Research, 54, p85.

Hellemans,A., (2007) “Manufacturing Mayday”, IEEE Spectrum, issue1, p10.

HolmesS., (2007) “The Battle for Air Supremacy”, Business Week, 4020,p102.

HolmesS., (2007) “The Secret Weapon at Boeing”, Business Week, 4016,p34.

Ireland,R. D., Hoskisson, R. E., &amp Hitt, M. A. (2008).&nbspUnderstandingbusiness strategy: concepts and cases.Mason, OH., South-Western Cengage Learning.

Johnson,S. B. (2011).&nbspSystemhealth management with aerospace applications.Chichester, West Sussex, Wiley.

Kemp,K. (2007).&nbspFlightof the titans: boeing, airbus and the battle for the future of airtravel.London, Virgin.

King,J.M.C., (2007) “The Airbus 380 and Boeing 787: A role in therecovery of the airline transport market”, Journal of Air TransportManagement, 13, p16.

KleinerMM Leonard JS &amp Pilarski AM (2002), “How industrial relationsaffects plant performance: The case of commercial aircraftmanufacturing”, Industrial &amp Labour Relations Review, 2, p195

Leary,W. M. (1995).&nbspInfrastructureand environment.Washington, DC [u.a.], Smithsonian Inst. Press.

Lorange,P. (2010).&nbspLeadingin turbulent times: lessons learnt and implications for the future.Bingley, Emerald

Loveless,A. (2010).&nbspTestpilots.St. Catharines, Ontario, Crabtree Pub. Co.

Lynn,M. (1996).&nbspBirdsof prey: the war between Boeing and Airbus.London, Mandarin.

MacPhersonA. &amp Pritchard D., (2003), “The international decentralisationof US commercial aircraft production: Implications for US employmentand trade”, Futures, 3, p221

Malaval,P., &amp Bénaroya, C. (2001).&nbspStrategyand management of industrial brands: business to business productsand services.Boston, Kluwer Academic Publ.

Mason,K.J., (2007), “Airframe manufacturers: Which has the better view ofthe future?”, Journal of Air Transport Management, 13, p9.

Mathews,N., Wall, R. &amp Meacham, M., (2006), “Mixing It Up”, AviationWeek &amp Space Technology, 165, p46.

Matlack,C., Holmes S. &amp Magnusson P., (2004) “BOEING VS. AIRBUS: IT`SGETTING UGLY”, Business Week Year, 3900, , p50.

Maxwell,D. (2007).&nbspAirbusA380: superjumbo on world tour.St. Paul, MN, Zenith Press.

Maxwell,D. (2007).&nbspAirbusA380: superjumbo on world tour.St. Paul, MN, Zenith Press.

McMastersJH. &amp Cummings RM, (20020, “Airplane Design—Past, Present,and Future”, Journal of Aircraft, 9, p10

Miller,N. (2010).&nbspProjektAirbus A380.München, GRIN Verlag GmbH.

Millichamp,A.H., Foundation Accounting, (2007), Letts Educational

Newhouse,J. (2008).&nbspBoeingversus airbus: the inside story of the greatest internationalcompetition in business.New York, Vintage.

Norris,G. (2005).&nbspAirbusA380: superjumbo of the 21st century.St. Paul, Minn, MBI Pub.

Norris,G., &amp Wagner, M. (2010).&nbspAirbusA380 superjumbo of the 21st century.Minneapolis, MN, Zenith

O’Neal,M., (2012)“Is Airbus Pushing the Envelope?”, Business Week, 3181,1990, p42.

Ott,J., (2007) “MARKET FOCUS: Spirit AeroSystems Stock Has Analysts AllOver the Map”, Aviation Week &amp Space Technology, 2, , p10.

Pandey,M. R. (2010).&nbspHowBoeing defied the Airbus challenge: an insider`s account.

Pavcnik,N. (2002),,”Trade disputes in the commercial aircraft industry”,The World Economy Year, 5, pp733-752

Power-waters,B. (2005).&nbsp93seconds to disaster: the government`s great cover-up.New York, N.Y., IUniverse.

RoyalAeronautical Society. (1993).&nbspAdvancedavionics on the Airbus A330/A340 and the Boeing 777 aircraft.[London], Royal Aeronautical Society.

Schaub,F. (2010).&nbspAirbus- Herausforderungen des Informationmanagements am Beispiel A380 EineFallstudie.München, GRIN Verlag GmbH. http:

Senguttuvan,P. S. (2006).&nbspFundamentalsof air transport management.New Delhi, Excel Books.

Sparaco,P. &amp Taverna, M.A., (2004) “False Start”, Aviation Week &ampSpace Technology, 21, , p 42.

Sparaco,P., (2007) “Airbus`s Annus Horribilis: Airbus Shaken by MultipleCrises in 2006”, Aviation Week &amp Space Technology, 1, , p45.

Sparaco,P., (2007), “A Mad, Mad World: European Perspective: AirlineIndustry is Woefully Inadequate”, Aviation Week &amp SpaceTechnology, 3, p430.

TongC.H. &amp Tong Lee-Ing., (2003), “boeing vs. airbus: competing forthe future”, Competitiveness Review, 2, p28.

Wall,R. &amp Flottau, J., (2007), “Underpowered: Airbus Scrambles ToSalvage Power 8 Launch Airbus scrambles to make Power8 palatable toprincipal stakeholders”, Aviation Week &amp Space Technology, 9,p46.

Wall,R. &amp Meacham, M., (2006) “Narrowing the Gap”, Aviation Week &ampSpace Technology, 20, , p95.

Wall,R. &amp Sparaco, P., (2007) “A Mad, Mad World: EuropeanPerspective: Airline Industry is Woefully Inadequate”, AviationWeek &amp Space Technology, 3, , p430.

Wall,R., (2007), “A380 freighter falls in priority”, Aviation Week &ampSpace Technology, p35.

Wall,R., (2007), “Will It Fly?: Questions hang over Airbus Power8initiative Eyes are on Airbus as it overhauls industrial setups andsupplier relations to regain competitive footing, financial health”,Aviation Week &amp Space Technology, 10, p37.

Wall,R., (2007)”, “More Turbulence: Tough Decisions Loom for Airbus inEarly Aviation Week &amp Space Technology, 4, 2007, p35.

Walter,JS., Lorsch, J., Khurana, R., Donaldson G., Pound J., Conger A.J.,Finegold D., Lawler E.E., et al, (2000), Harvard Business SchoolReview on Corporate Governance, Harvard Business School Press

Whaley,M., (2007) “Boeing versus Airbus: the inside story of the greatestinternational competition in business”, Booklist, 9, ,p9.

Williams,R.J., Haka, S.F. &amp Bettner, M.S., (2005), Financial &ampManagerial Accounting, McGraw-Hill.

Willie,D, J., (2007), “Boeing Vs Airbus’’, IEEE Spectrum, 9, p13.