For Airbus a ‘no-deal’ Brexit would be disastrous

Airbus A330
(Photo: By New York-air, CC BY-SA 4.0,
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So, 30 June 2020 has passed, we have not asked for an extension to the Brexit Transition Agreement, and we now have until this coming October to finalise the terms of our relationship with the European Union. If we fail to agree a deal, suppliers across the land will be deeply affected – not least Airbus. 

Airbus employs some 9,000 people in its civil aircraft division at Broughton, North Wales and at Filton, Bristol. The Broughton factory – one of the largest factories in the United Kingdom – is where Airbus wings are assembled: Airbus designs the wings of all its large civil aircraft at Filton and plays a key role in the South West region – the largest aerospace cluster in the UK, and one of the largest concentrations of aerospace and defence capabilities in Europe.

Airbus has held around 50 % of the world market share in large civil aircraft since the turn of the century. But it was not always thus. 

Before World War II, European aerospace companies had around 35%-40% of the world market in large civil aircraft; by the mid-1960s this was down to 5% and falling, with the US on the point of achieving a complete monopoly. It was then that Airbus was formed, bringing together much of the aerospace industries of France, the UK, Germany and Spain, as a desperate measure to stop the rot. 

The post-war period had shown that in major industries such as aircraft design and manufacture, the domestic market of one European country was insufficient to support a globally competitive company: the hope was that by combining the industries of four European countries, it might be possible to turn things around. It was a struggle in the early years, but gradually Airbus crawled and then climbed back to the point where it had proved to the world that by working together, European manufacturing companies can beat the best in the world.

The US Government has been very supportive of its aerospace industry over the years, in terms of military procurement and research support. Similarly, governments in Europe have actively supported the Airbus consortium. With the US aerospace industry, there has been rationalisation – for example, with the merger of Boeing and McDonell Douglas – but a stable relationship with Government.

For most of Airbus’s existence, the UK has been a member of the European Union – though that was not the case at the outset, and is not the case now.

The initial intergovernmental agreement in support of the Airbus partnership was reached in 1967 – the same year that General de Gaulle issued his second veto on the UK joining the European Economic Community (‘EEC’). It was not until 1973 that the UK entered the EEC, by which time the initial organisation – Airbus Industrie GIE – had been formed as the coordinating and external interfacing body within the partnership.

The structuring of the Airbus partnership – with a small coordinating and outward-facing group at the centre – was remarkably similar to that of the EEC, with Airbus Industrie in Toulouse playing the role of the European Commission in Brussels.

It was in the 1990s that both entities started to reassess their structures: at the political level this led to the Maastricht Treaty and a commitment to greater European integration; at the industrial level, the proposal was the transformation of the Airbus partnership into a Single Corporate Entity.

It was in 1999 that Airbus for the first time secured more than 50% of the world’s large civil aircraft market. Within a couple of years – after a decade of planning – Airbus became a conventional Single Corporate Entity, with BAE Systems transferring its factories in return for a 20% stake in the combined business. Five years later, BAE Systems sold its stake in Airbus – the culmination of major corporate restructuring that had taken place in the aerospace and defence industry around the millennium. Then, in 2007 at a governmental level, the Treaty of Lisbon was signed, which further streamlined and democratised the EU processes.

Thus, over the last 50 years the relationship between the European countries within the EU has been one of movement towards a more coherent single grouping. In parallel, the Airbus organisation has evolved from a loose partnership to that of a single entity. 

The British aerospace industry and Government were late in coming fully on board with Airbus at the outset, while British industrial ownership has indeed now ceased.  Similarly, the UK were late to join the EEC, and has now left the EU. Hawker Siddeley hung on at the outset before the UK joined the EEC, while Airbus UK – with government engagement – has continued to flourish within the single company since the BAE Systems sale.

Whilst the overall Airbus business has benefited commercially from Boeing’s 737-Max problems and has suffered from the impact on the aviation industry of the coronavirus pandemic, such issues relate to the business as a whole.  

But the terms of the future relationship between the UK and the EU will, however, specifically impact the Airbus business in the UK.

Airbus has made it very clear that whilst a Brexit deal will put a strain on the organisation, a ‘No-Deal’ Brexit would be disastrous: it could trigger both serious short-term disruptions and longer-term strategic reappraisal. The new Airbus CEO, Guillaume Faury, has been more upbeat in his recent comments concerning the UK: let us sincerely hope that this optimism is not holed below the water-line by a ‘No Deal’ outcome.

Robert Whitfield is a former Senior Vice President of Airbus Industrie

© Robert Whitfield