The Airbus consortium, a true European dream team

“We cannot solve our problems with the same thinking we used when we were creating them”

(Albert Einstein, 1879-1955)

Various signals confirm that the competitiveness of European industry is rapidly declining. The painful reality is that Europe's industry does not innovate enough and lacks the scale of the American and Chinese markets. Due to, among other things, high energy prices, overregulation and the lack of a capital union, Europe is falling further behind.

The long-awaited Draghi report was recently published, entitled “The Future of European Competitiveness”. Mario Draghi describes in his report a sound strategy to strengthen the EU's competitiveness. He advocates the combination of innovation and coordination; by working together better, the EU can bridge the innovation gap. It requires far-reaching reforms, from adjusting competition rules, strengthening capital markets to limiting dependence on external raw materials. The report also identifies a number of concrete focus areas: energy, digitalization, cleantech, defense and pharmaceuticals.

Although the report has received a lot of praise, several politicians and policymakers are reluctant to commit to it. In particular, the required investments, estimated by Draghi at additional annual expenditure of 750 to 800 billion euros, are rejected by various member states as unfeasible. It is the unmistakable reflex of shortsighted representatives who believe they are serving their voters by putting alleged national interests above European cooperation and integration. It is the implementation of Draghi's strategy that serves the interests of European citizens, not the nationalist and protectionist attitude of some Member States. Naturally, some of the investment funds will evaporate, simply because many innovation projects fail. But it is the successful innovations that make the difference and determine Europe's competitive position on the world market. Let's look at a good example: the Airbus consortium.

Airbus was founded in 1970 under the name Airbus Industrie, with the aim of breaking the dominant market position of the American aircraft manufacturers. It started as a partnership consisting of the French Aérospatiale and the German Aerospace, which the Spanish Construcciones Aeronáuticas  joined in 1971. British Aerospace participated for several years as well, from 1979 to 2006. Aérospatiale was a state-owned company with important production facilities, such as in Toulouse, where the final assembly of the Airbus aircraft now takes place. Deutsche Aerospace is the driving force behind Airbus' technological development and also has large production sites, including the Hamburg site. Construcciones Aeronáuticas produces parts such as wings. Seville is an important location for the assembly of transport aircraft.

In the early years, Airbus faced major challenges. Development costs were high and financial risks were considerable. The launch of the Airbus A300 required heavy investment amid uncertainty about demand for twin-engine widebody aircraft. Entering the market and gaining market share also proved difficult. Boeing was an established partner in the aviation industry and airlines were difficult to convince to choose another supplier. Moreover, the cooperation and coordination between the participants in the consortium caused organizational and logistical problems. As a result of these challenges, Airbus was heavily dependent on financial and political assistance from European governments, which led to long-standing disputes between the US and the EU in the World Trade Organization (WTO) over alleged unauthorized subsidies.

Airbus chose to compete with Boeing through technological innovations and targeted market approaches. When launched on the market, the A300 was more fuel efficient than its competitors, including the Boeing 747. In the 1980s, the A320 was delivered with groundbreaking technology, such as fly-by-wire and a digital cockpit, which distinguished Airbus from Boeing. Airbus initially offered competitive pricing and flexible financing to attract new customers. Airbus managed to gain a foothold in the US by leasing Eastern Airlines A300 aircraft on very favorable terms. It earned them many orders. Production in countries where Airbus served customers, such as the A320 factory in Alabama, was also part of the well-thought-out market strategy. Over the years, Airbus has grown into a global player that now produces half of all passenger aircraft in the world. Within the consortium, 33 leading companies from 12 countries have now bundled their expertise and innovation power. With the innovations of the A320, Airbus even managed to put Boeing on the defensive; due to the success of the A320neo, Boeing decided to modify the 737 instead of developing a new aircraft. However, incidents with the plane named 737MAX have not improved Boeing's reputation compared to Airbus.

The Airbus consortium has proven itself to be a true European dream team. Through scale, innovation and strategic collaboration, the company has built up a solid market position over 50 years. The consortium achieved a turnover of €65.4 billion and a profit of €3.8 billion in 2023. Of course, this market position is partly due to European subsidies. This led to trade disputes and mutual import tariffs between the US and the EU. However, without government support, these types of strategic companies often do not get off the ground; Boeing relies heavily on military orders from the government and the rapidly emerging Chinese aircraft industry is also heavily subsidized.

The EU is in many ways, in some ways even dangerously so, dependent on the US and China. Whether it concerns defence, technology, digital infrastructure or the green economy, Europe lacks scale, innovativeness and competitiveness. Not as a result of inability, but due to a lack of ambition and political will. Airbus has proven that Europe is capable of a lot and can be a formidable competitor, even when high technology is involved and enormous catching up is required. The Draghi report provides a clear picture of what the EU needs to do and how Europe regains its competitiveness. What the EU needs are innovations on a European scale by reforming the capital market, regardless of national interests, investing heavily in promising sectors and focusing on economic resilience, technological autonomy and credible defense.

Draghi's report is the way forward. The newly constituted European Commission appears to be more decisive than the previous one. The commissioners seem to agree in principle on the need to implement the Draghi report. However, opinions differ about how this is done. And although the commissioners operate independently of the country from which they are delegated, the counterbalance of the member states will be felt. Unfortunately, the increasing right-wing populism in many Member States is not doing any good to the chances of success of “The Future of European Competitiveness”.