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Table of Contents
Table of Contents... 1
1. Introduction ... 2
2. Airbus company profile ... 3
3. Case study "Ethics and Airbus" (Cateora & Graham, 2007) ... 4
4. Update of case study "Ethics and Airbus"... 6
5. Ethics ... 8
6. PESTLE
analysis... 12
7. SWOT
Analysis ... 16
8. Recommendations ... 22
9. Conclusion and outlook ... 27
10. Reference list ... 28
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1. Introduction
This report examines Airbus, one of two major players in the global aircraft
manufacturing industry. Recent findings indicate that Airbus might have showed
unethical business behavior in convincing customers to purchase its aircraft. After
presenting and analyzing these allegations and updating potentially unethical conduct
by Airbus to the present day, this report continues to discuss the topic of ethics in
general. It is then elaborated how ethics are applied within the aircraft manufacturing
industry by its two main players Boeing and Airbus.
Following this, tools such as a PESTLE analysis and a SWOT analysis of Airbus are
presented. Based on the findings of these analyses, recommendations for Airbus are
formulated and examined with regard to practicability and feasibility aspects.
Recommendations will be divided into short-, medium- and long-term strategies.
Finally, this report will conclude by summarizing the findings and giving an outlook to
Airbus' position in the global marketplace.
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2. Airbus company profile
Airbus is the world's largest commercial aircraft manufacturer and, according to the
company's website, is at the forefront of the industry and consistently captures about
half of all commercial airline orders (Airbus, 2007). Originally, Airbus was formed in
1970 when four major European aerospace companies created a consortium to build
commercial aircraft ("Airbus paves way for its giant contender", 2004). Until 2000,
planes were manufactured by allied yet independent companies, with marketing being
performed by Airbus. In 2000, the consortium structure was abandoned in favor of a
French-registered company, raising 3.5 billion Euros with the initial public offering of
EADS, European Aeronautic Defense & Space Company, of which Airbus is a
subsidiary (Cateora & Graham, 2007).
Today, Airbus operates globally and employs approximately 57,000 people. Airbus
operates fully-owned subsidiaries in the United States, China, Japan and in the Middle
East and has a network of 1,500 suppliers in 30 countries. Manufacturing aircraft
models with capacities ranging from 107 to 800 passengers, Airbus has sold over
7,000 aircraft and its planes form part of the fleet of more than 200 airlines (Airbus,
2007).
Since its inception, Airbus has developed well and today is an important player in the
global commercial aircraft industry, having steadily gained market share from its main
rival Boeing.
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3. Case study "Ethics and Airbus" (Cateora & Graham, 2007)
Having established that Airbus is a European success story today, the case study
"Ethics and Airbus" highlights some methods used by the company to achieve orders
from a handful of customers in the past. Admitting that the vast majority of aircraft are
sold and bought in conventional ways without arising suspicion, the case study details
the following examples in which Airbus might have made use of questionable methods
to sell its aircraft:
· Sabena
The former Belgian state carrier collapsed in 2001 and investigations revealed that an
order of 34 A320 has been a major cause for the collapse. Describing it a "fatal
business decision" because the aircraft were not required, the case study continues to
state that no proof for side-payments or bribes could be found but the suspicion of foul
play could not be ruled out.
· Kuwait Airways Corporation (KAC)
The next example concerns Kuwait Airways Corporation that ordered aircraft valued
at US$ 1.1 billion from Airbus, with another option worth US$ 900 million. A lower offer
from Boeing was disregarded.
However, foul play became evident only after it was discovered that the Airbus' Head
of Sales in the Middle East was a well-paid part-time commercial advisor to KAC.
· Indian
Airlines
In the early 1980s, Airbus has allegedly bribed Indian public servants to favor Airbus
aircraft over Boeing. Airbus was able to sell 19 A320s although this model at this time
had not been launched or flown. Airbus offered the A320 as a smaller and less
expensive alternative to Boeing's 737, with incomplete technical data in every field.
Still, Airbus was successful and a better offer from Boeing was rejected on grounds
that are still unclear today.
· Air
Canada
In 1988, Airbus received the first major order in North America, when Air Canada
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ordered 34 aircraft worth US$ 1.5 billion. This deal was suspected to have been
achieved through questionable commissions. Reports and investigations later
discovered that Airbus had paid commissions totaling US$ 22,540,000 to a
consultancy company. This consultancy company had close ties to Canadian and
European politicians and assisted Airbus in securing the AC order. The extraordinary
facet of this case is that Airbus openly admitted to these payments.
· Syrianair
Serious irregularities in connection with Syrianair's order of six A320s in 1996 led to
the conviction of three people. These three men have forced Syria to purchase Airbus
aircraft, incurring big financial losses to Syrianair and the nation of Syria. The
conclusion drawn by reports is that bribes were paid, the reason for which is quite
doubtful because Boeing was not competing for the order for political reasons.
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4. Update of case study "Ethics and Airbus"
All these examples have occurred well in the past, with one case dating back as far as
the early 1980s. Nevertheless, a speech delivered by US Senator Patty Murray ("Will
the last aerospace worker leaving America turn out the lights?", 2004) has found
various other incidents in which Airbus might have acted unethically or at least
suspiciously. Murray confirms the case study in saying that Airbus was able to take a
tax deduction for bribes until 2000 and she cites the following incentives and threats
used by Airbus in the past:
· Prime landing slots at European airports
Murray (2004) highlights how purchases of Airbus aircraft have been linked to landing
rights at Europe's busiest and most important airports, mentioning the cases of
easyJet, Malaysia Airlines, Emirates and Qatar Airways. All these airlines were given
more favorable slots or landing rights following orders for Airbus.
· Discounts
Next, Murray (2004) accuses Airbus of selling aircraft below the cost of production.
According to her findings, Airbus does not have the same commercial accountability
due to its support from EADS and European governments. This will be highlighted at a
later stage of this report, however Murray points out that Airbus regularly sells aircraft
below cost to gain market share.
· Guarantees
According to Murray (2004), Airbus promises airlines that its aircraft will hold their
value in the future. Normally, the price of used aircraft is determined by market factors,
however Airbus was found to have offered various airlines to pay the difference
between Airbus' projected value and the market value, far above an aircraft's actual
value.
· Aircraft purchases linked to other trade issues by European officials
Finally, Murray (2004) links Airbus sales to unrelated trade issues. She cites five
cases in which European trade policies appear to have been linked with aircraft
purchases. Also, Airbus aircraft were a part of EU accession negotiations, with Murray
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