Shot down

Airbus Should Fully Retreat from its Military Venture

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Not such a polished plan.
  • Why it matters

    Why it matters

    Airbus has been pushing to grab a bigger slice of the arms market but E.U. defense budget cuts are jeopardizing its investment.

  • Facts

    Facts

    • Airbus is selling off some of its specialist military companies.
    • The aviation company’s foray into land-based weaponry was turbulent.
    • It could generate up to €2 billion from the sales.
  • Audio

    Audio

  • Pdf

A great idea was hatched. Airbus would expand, ascend to new heights and become a heavyweight in the arms industry. But, five years on, and after announcing plans to sell some parts of its military business, it’s time for the aviation giant to pull out of the ill-executed expansion.

The plan was devised when Airbus was known as EADS. As part of it, managers diligently bought up companies that produced electronics and technology for military forces, adding to the firm’s existing business of jet fighters and helicopters.

The logic was simple: If a country already planned to buy Eurofighters from Airbus, then the French-German company could also outfit the nation’s army. Military procurement contacts in each sector were, as a rule, identical.

Airbus should concentrate again on aviation. In this case, less is more.

But the thinking was flawed. Airbus might want to become a world market leader in military aircraft, but the new foray didn’t work out. A deal with Saudi Arabia to help the country secure its borders, for example, went badly.

Airbus spread itself too thin when it broadened its defense sector. If Airbus chairman Thomas Enders puts the company’s Atlas Electronic or radar business up for sale, it would be the right move. The company should concentrate again on aviation. In this case, less is more.

Those responsible at Airbus will have to ask themselves why this big clean-up is only now taking place. Under the leadership of Stefan Zoller, the then-head of the defense sector, Airbus expanded its portfolio. But Mr. Zoller left the board two years ago.

But Mr. Enders and his management team allowed the plan to continue. Areas with annual turnovers of €2 billion will be sold. As inconsistent as the integration of the new business segments was, as consistent as the split is now. Only, that it’s far too late.

E.U. countries are reducing their defense budgets, darkening the outlook for the arms industry. That will be apparent in the sale price of the Airbus subsidiaries. Ultimately, it will be an expensive episode in the company’s history.

The author is a correspondent for Handelsblatt in Frankfurt and specializes in the steel, car and defense industries. He can be reached at: murphy@handelsblatt.com.

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