EADS

The idea of transnational European cooperation in the aerospace sector originated in the mid-1960s, when government-owned aircraft operations in Germany and France began taking steps that led to the 1970 creation of the Airbus Industrie initiative for commercial airline production. The state-owned Spanish aircraft company Construcciones Aeronáuticas SA (CASA) joined in 1971. Airbus introduced its A300 jetliner in 1974 but it took a few years before it was able to find buyers outside the countries participating in the Airbus consortium, which the UK joined in 1979. By the late 1980s Airbus had become a serious competitor to Boeing, even in the U.S. market, thanks to its popular A320 medium-range plane and then its long-range A340.

Meanwhile, consolidation of the military contracting sector in the United States in the 1990s prompted calls for a similar change in Europe. Germany had already seen the creation of Deutsche Aerospace AG (DASA) from the combination of the aerospace holdings of Daimler AG and three other companies. In 1992 DASA acquired the German government’s 20 percent stake in Airbus.

In the late 1990s DASA sought to merge with British Aerospace (now BAE Systems) and possibly Aérospatiale, which was then controlled by the French government and was a participant in Airbus. British Aerospace, however, decided to combine instead with GEC Marconi, while Aérospatiale joined with the Matra Group.

DASA, which took the name DaimlerChrysler Aerospace, was still interested in consolidation. It pursued a marriage with Aérospatiale, which had been renamed Aérospatiale Matra. In October 1999 a deal between the two companies was announced, and two months later Spain’s Airbus participant, CASA, agreed to join in the creation of what was dubbed the European Aeronautic, Defense and Space Company. EADS was formally founded in July 2000.

Although EADS, which was incorporated in the Netherlands for tax reasons, did not involve as many players as hoped, the company did bring together substantial interests in a variety of European aerospace operations. This meant, above all, an 80 percent interest in Airbus but also included all of the Franco-German Eurocopter company, 75 percent of the space technology operation Astrium, 45.7 percent of Dassault Aviation and 29.5 percent of Arianespace. The company also moved quick to set up joint ventures with companies such as Northrop Grumman. A plan for EADS and Italy’s Finmeccanica to combine their military aircraft capabilities fell through, but the two companies merged their missile business into an entity called MBDA, which was designed to create a serious challenger to missile leader Raytheon.

Soon after the creation of EADS, Airbus announced plans for a superjumbo airliner—capable of transporting more than 500 passengers—that was initially designated the A3XX and later the A380. In 2001 Airbus announced plans to convert from a consortium to a stand-alone corporation (controlled by EADS) that was incorporated in France as Airbus S.A.S. The company introduced the A380 in 2005 but deliveries were delayed by serious manufacturing complications said to be due to incompatible software being used by its French and German facilities. Around the same time, the company announced plans for its A350 midsize widebody to compete with Boeing’s 787. In 2006 BAE Systems announced it would sell its stake in Airbus, giving EADS 100 percent control.

As early as 2002, EADS executives were talking about their desire to build a larger presence in U.S. and British military markets. In 2003 EADS set up a U.S. holding company and opened a helicopter plant in Mississippi. Hoping to get a share of a lucrative Pentagon contract, EADS began looking for a U.S. location to produce refueling tanker planes. (Boeing’s presumed lock on that business weakened amid a scandal involving the company’s ties to an Air Force procurement officer.) In mid-2005 EADS announced that it had chosen Mobile, Alabama for the facility. Later that year, EADS said it would team up with Northrop Grumman in a bid for the refueling tanker contract.

In 2006 EADS North America got its first award as a prime contractor when its team was chosen by the U.S. Army to supply EC-145 helicopters for domestic use, so that more Black Hawks could be used in combat abroad.

In September 2006 EADS announced that Vneshtorgbank, a bank owned by the Russian government, had acquired a 5 percent stake in the aerospace company. Soon thereafter, the Russian government signaled that it wanted to have some say in the management of EADS. In February 2007 DaimlerChrysler decreased its interest in EADS from 22.5 percent to 15 percent. The shares were purchased by a group of German, Swiss and U.S. companies as well as some German government entities.

Later in 2007, the company announced that it would finally abandon its dual French-German management structure in favor of a single chef executive and a single chairman. The solo CEO spot went to Louis Gallois, who had been serving as the French half of the shared post, while his German counterpart Thomas Enders was given control of Airbus. Rüdiger Grube, who had been the German co-chair of EADS, became the sole chairman.

The new structure did not seem to help with problems EADS was facing in its multi-billion-dollar military transport plane program. In late 2007 the company admitted that the A400M was facing delays of up to a year. This problem—along with currency issues—helped bring about loss of more than $600 million for EADS in 2007.

The prospects for EADS brightened considerably in late February 2008, when the U.S. Air Force awarded the huge refueling tanker contract to EADS and Northrop Grumman, but the boon was short-lived. In June 2008 the Government Accountability Office, acting on a protest brought by Boeing, ruled that Air Force had erred in the award and said the bidding should be reopened.

In April 2008 EADS announced the purchase of PlantCML, a California-based provider of “emergency response solutions” for $350 million.