Big plane, big problems (cont.)

By Nelson D. Schwartz, Fortune senior writer

Rewiring

On a wintry January day in Hamburg, in a cavernous hangar along the Elbe where workers crawl like ants over unfinished A380 jets, top execs in suits and ties joined workers in blue coveralls for an indoor picnic on the factory floor, complete with beer and sandwiches, to celebrate the final wiring of an A380 destined for Singapore Airlines. The plane - the first that will fly real passengers - is far from finished. Before it is delivered to Singapore in October, seats, galleys and other cabin furnishings will be added, along with a final coat of paint.

The party, attended by Airbus programs chief Tom Williams, is a sign of both how much progress the company has made since the delays were announced last year and how far Airbus still has to go. While the first Singapore jet's problems have been solved, another 20 planes will have to undergo what Airbus calls "haute couture" production: flying assembled planes from the Toulouse factory to Hamburg, where ill-fitting wiring is ripped out and painstakingly replaced.

Not until the end of 2008, when new software systems will allow engineers in Toulouse and Hamburg to work together and avoid any rewiring, will haute couture be replaced by what might be called prêt-à-porter. For now, says Williams, "it's a very intense manual effort, with a lot of checks and double checks. But I'm a lot more comfortable than I was in September or October."

While workers in Hamburg scramble, the scene is different at the Toulouse factory, where the A380's fuselage, wings, and tail are joined together. There ten A380s in various stages of assembly lie about like beached whales - some with wings, some without. Tails are painted with customers' bright logos, but the fuselages have only a dull-green anti-corrosive covering. The floor is so quiet, you can overhear workers chatting in French, German, Spanish and British-accented English - representatives of the four countries that control Airbus.

"In Toulouse, we're operating at 25 percent of where we should be," says Williams. With the wiring problems still being sorted out plane by plane in Hamburg, Williams doesn't expect the pace in Toulouse to pick up until the end of next year. "We've slowed down the process to focus on the bottlenecks, because if you're not improving the bottleneck in Hamburg, it doesn't matter what you're doing elsewhere."

For Williams, "elsewhere" refers to the A380's geographically convoluted production line that stretches from the plant in Wales where the wings are built to the Spanish factory that makes the tail. For customers, though, "elsewhere" has a different meaning: They're worried that the problems surrounding the A380 will spill over into other programs, like the A350 XWB, a midsized, long-range airliner designed to compete with both the new Boeing 787 Dreamliner due out next year and the Boeing 777 flying today. The A350 isn't expected to fly until 2012 and will cost an estimated $10 billion to develop, but Airbus needs it to compete in the fast-growing market for midsized planes.

Customers like C. Jeffrey Knittel, president of aircraft-leasing giant CIT Aerospace, are worried that the Herculean efforts required to get the A380 airborne will ground the A350. "We hope issues surrounding the A380 won't further delay the A350," he says. Although his firm hasn't ordered any A380s, Knittel says Airbus can't afford another delay in that program. "We really hope they deliver this time. Any further delays could create doubts about future programs and could be a drain on internal resources."

Indeed, Knittel says he told Leahy exactly that at a dinner in New York in early February. And there's no doubt Leahy is listening. But even as he pushes customers to go with discounts instead of penalties, his offer wasn't enough to keep FedEx onboard. "They never offered discounts that could offset the lack of a timely delivery," says Lane. "I don't think they knew the trouble they were in prior to our announcement."

Leahy insists that other large A380 customers have moved beyond anger and are now in the acceptance stage regarding the delays. "They're past the point of yelling," he says. "They just sit there and stare, speechless, and then ask, 'How could this have happened?'" It's a good question, of course, but Leahy is more focused on selling the next plane than looking back. "This is the time to buy, when there's blood in the streets," he says with the charm that has made him one of the most successful salesmen in aviation. "Why not order a few more?"

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Take a look inside of an A380

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