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Airbus tightens belt with new corporate shake-up

By Robert Wall

London – Airbus Group SE is to merge headquarters and eliminate an unspecified number of management jobs in a new restructuring plan to improve profitability and focus more squarely on its largest unit that makes airliners.

Airbus Chief Executive Tom Enders said that the restructuring would yield significant savings, facilitate faster decision making, and narrow a profitability gap to rival Boeing Co.

Europe’s top aerospace company said that it will integrate the headquarters for the group and the commercial-jetliner operation for which Airbus is best logo

The merged entity will carry the Airbus name from January 1, 2017.

“We aren’t just trying to get leaner at the shop-floor level, we are really starting at the top of the company,” Mr. Enders said.

Merging the corporate structure with the jetliner unit soon should yield financial benefits. “I would expect, starting from next year already, we should see some of these savings come to the bottom line,” Mr. Enders said in an interview.

The scale of the savings, as well as the number of layoffs and costs to see them through aren’t clear yet, he said. Those will depend on negotiations with labor representatives that are now getting started. The consultation process is set to begin next Tuesday.

Mr. Enders said the job losses won’t be “insignificant” though smaller than the almost 8,000 jobs cut in a previous restructuring. The goal, he said, would be to make the winnowing of management ranks “as thorough and substantial as possible.”

Despite an order book for jetliners that stretches out for several years, Airbus faces financial pressures. Costs to build its new A350 long-range jet have proved higher than planned. The A400M military transport plane has suffered repeated technical problems and delays, leading to repeated hits against earnings. In July, Airbus was forced to announce a cut to production of the poorly selling A380 superjumbo from 27 planes last year to 12 in 2018 and a return to losing money building its flagship jetliner.

Mr. Enders said those pressures weren’t driving the reorganization. “The most important thing is the company becomes faster and leaner and thereby enables transformation across the entire group.”

The Airbus chief executive has become increasingly concerned faster moving technology startups could steal some the company’s business. Elon Musk’s Space Exploration Technologies Corp., or SpaceX, has already reshaped the rocket business, driving Airbus also to purchase lower cost satellite launch options.

Airbus also faces stiff competitive pressure in its commercial plane making business where it and its larger rival Boeing have enjoyed a period of record plane orders, swelling their combined backlog to more than 11,000 planes to be delivered. Now executives at both companies are focusing on how to build them profitably.

Boeing has been restructuring under its new Chief Executive Dennis Muilenburg, who took the top job last year after running the Chicago-based company’s defense business. Mr. Muilenburg has refreshed Boeing’s executive ranks, promising growing margins for the commercial airplane and defense units.

At Airbus, Fabrice Bregier, who runs the commercial airliner unit, will also serve in the newly created role of group chief operating officer, responsible for supply chain and other functions to underpin.

Mr. Enders said the restructuring should “contribute” to closing the profitability advantage that Boeing has.

The move is the latest in Mr. Enders’ four-year campaign to overhaul the company in the wake of the 2012 failed merger attempt with Europe’s largest arms maker BAE Systems PLC. “For me this is the logical conclusion of the journey we started in 2012,” Mr. Enders said.

After the deal faltered on German government opposition, he won shareholder backing for a new structure that reduced French, German and Spanish government involvement in company decision making, a legacy of the founding of the company in 2000 through the combination of European aerospace and defense assets.

Airbus in 2013 moved to merge defense and space assets and shed some businesses assets not central to its aerospace business.

With the latest shift, the move of headquarters functions to Toulouse from their former home of Paris and Munich should be completed, Mr. Enders said.

Even though the restructuring is focused on the group headquarters and commercial airplane unit, Mr. Enders said the defense and helicopter activities remained “integral” to the company. They would also benefit from reduced costs, he added.