Chris Geoghegan has an unusual aim in life. The managing director of British Aerospace Airbus wants to do himself out of a job. He is steering the company through the difficult transition from being one of four partners in the Airbus joint venture to being a fully integrated part of a ‘single corporate entity’.
Rationalisation of the management structure is at the top of his agenda. ‘The current structure looks complex but works very well,’ he says. ‘We’ve actually become quite good at managing the process. But it can never be as optimised as having a single management in control.
‘We have created a series of centres of excellence around Europe, with very little duplication of resource. The sooner we do away with having four managing directors and get to having one single management structure, the sooner we’ll streamline and optimise the performance. One of my principal objectives of the next two or three years is to do away with the managing director of BAe Airbus.’
At the moment, there are four management teams, and many of the people in them will continue in the new set-up. ‘What we won’t have is four separately directed streams of management,’ says Geoghegan.
Airbus, a partnership of France’s Aerospatiale and Germany’s Dasa, with 37.9% each, British Aerospace with 20%, and Spain’s Casa with 4.2%, has been an enormous success, confounding cynics about European collaboration. Since its foundation in 1969 it has gone from nowhere to second place in the world civil aerospace market, eclipsing Lockheed and McDonnell Douglas and strongly challenging Boeing. But the conversion to a single company will be a pivotal event in its history.
Geoghegan, aged 42, is a career British Aerospace man who joined Hawker Siddeley Aviation as an undergraduate apprentice. He rose through the ranks, becoming deputy managing director for operations of the newly formed Airbus division in 1989, managing director the following year. It seems a safe bet that when he succeeds in making himself redundant he will find another high profile job in the organisation.
With BAe Airbus, Geoghegan’s strategy for the past seven years has been to shape and rationalise the business to ease the transition to the single company.
Most Airbus staff will not notice much difference on the first day of the new company, he says. Strategic management and coordination of engineering and manufacturing resources will come from an enlarged headquarters operation in Toulouse, while day to day management will remain local.
Manufacturing will not be immediately affected, but in time the share-out of work could change. At present BAe Airbus designs and builds all the wings for the range. ‘Clearly there is an opportunity over time for work to be distributed differently. Nothing is guaranteed for any factory,’ says Geoghegan.
BAe Airbus is believed to be beating its partners in the profits league, with some analysts claiming that it is the only one to make any profit at all from Airbus operations.
Geoghegan himself says: ‘I don’t think we are the only one making a profit. I do think we are making more than the others. We go into the single company in very good shape.’
The creation of the single company seems to be painfully slow – the process is not expected to be complete until 1999. By contrast, the Boeing/McDonnell Douglas merger should be complete later this year, if it passes scrutiny by US and European competition authorities.
Geoghegan says the two processes have a different start point, with the Airbus merger complicated because it involves two publicly quoted companies – BAe, and Dasa parent Daimler-Benz, and two state-owned ones – Aerospatiale and Casa.
Further, ‘Boeing and McDonnell Douglas can very quickly create a new corporation. Having done that they’ve got to start to deal with integration of those companies and make it work. That is a long haul when you’re bringing together two companies which have got very little in common today.
‘By contrast, it will take us longer to get to the point where we’ve got a corporate structure in place, but the effectiveness will be almost immediate.’
Geoghegan attributes Airbus’s success to the vision of its founders of what Europe could achieve if it produced a complete family of aircraft to cover the range of airline needs. The initial aim of capturing a third of the market was, at the time, very ambitious.
It was not until the advent of the A320 single aisle aircraft in 1984 that the vision began to become clear to the outside world. Today, Airbus’s common cockpit across its entire range is a big selling point, as was the bold move to adopt fly-by-wire technology. This was much decried at the time by competitors such as Boeing, who 10 years later adopted the principle on the 777. Airbuses ‘can sell at a premium because of the technology’, says Geoghegan.
The vision was not shared by the Labour Government, which pulled out of the partnership in 1969. The UK only became an official partner in 1979. What was then Hawker Siddeley had stayed in as a subcontractor, and its expertise was held in high enough regard for it to have kept responsibility for designing and building the wing.
‘We now look at Airbus activity and wing design technology as absolutely the core of the UK’s civil aerospace business,’ says Geoghegan.
‘That the UK has demonstrated its scepticism and not been as supportive of Airbus politically as France and Germany has generated uncertainty. It’s not dissimilar to our involvement in Europe generally.’
This was demonstrated most recently with the FLA (Future Large Aircraft) military project, the proposed rival for Lockheed’s Hercules transporter. The Ministry of Defence wavered initially and came on board late, threatening BAe’s position.
‘If the UK had not made it clear it intended to buy FLA and that BAe was going to participate, Germany would have been doing the wing,’ claims Geoghegan.
‘Having had the opportunity, you could guarantee that on the next civil programme its position would have been strengthened.’
The partners remain hopeful of a formal launch for the FLA late next year.
Other planned launches include the stretched A340-600, which, with 382 seats in three classes, will take Airbus into the lower end of the Boeing 747 market. More controversial is the A3XX, which will be bigger than the 747, challenging Boeing head on.
Earlier this month, Airbus published its bullish predictions on the potential market for the aircraft. In contrast, Boeing says it is not convinced there are enough would-be buyers to justify an investment, and even individual Airbus partners seem more pessimistic than the official consortium as a whole.
The discrepancies, Geoghegan reckons, originate from different ways of dividing up the 400-plus seater market, and the inherent difficulty of predicting 20 years ahead.
‘The reality behind the individual estimates is very similar,’ he believes. ‘Most airlines want an aircraft with more than 450 seats, with the capability of accommodating the next 10 years’ growth in traffic on specific routes. And with even Boeing forecasts suggesting that there are more than 1000 747s yet to be sold, we cannot allow them to have that market to themselves.’
Geoghegan sees the civil aviation market as on a major up-cycle, meaning that resources and skills will be at full stretch for the next three or four years. Further ahead, he is concerned about levels of R&D funding from the Government. He says: ‘In the UK we are woefully inadequately funded for aerospace technology. The case has been made time and time again by select committees.’
He believes that Britain, in contrast with Continental countries, does not put money into aerospace – ‘even though it is probably benefiting most from past investment in aerospace’.
While America’s Nasa provides hundreds of millions of dollars to McDonnell Douglas and Boeing, the UK’s entire civil aircraft R&D budget is only £20m for the whole industry, including engine and equipment manufacturers, says Geoghegan.
‘We’ve got to find a means of multiplying the current level of investment four or five fold, and very rapidly,’ he says. ‘Part of the reason we have been so strongly challenged by our German partner over leadership on the wing is because there’s a genuine perception in Europe that the UK is not investing in technology, and that the technology in the UK is progressively becoming outdated.