Now, Airbus Is Cruising ComfortablyDori Jones Yang
Every time Airbus Industrie wins a U.S. aircraft order, talk focuses on finance: How sweet was the deal? And did European government subsidies help the consortium make an unbeatable offer? Airbus denies it, but the chatter ignores a more compelling story: In less than a decade, Airbus Industrie of North America Inc. has gone from an inept marketer with 20 salespeople, one plane to sell, and poor customer service, to a powerhouse combination of technologically sophisticated aircraft and top-notch service, as well as the famous, too-good-to-be-true financing. The result? Airbus is now a deadly serious competitor in North America.
Airbus' hot new deal with United Airlines Inc. is proof. United in early July agreed to lease 50 narrowbody A320s from Airbus and took options for 50 more. UAL cut the $3 billion deal because it liked the planes--their range, speed, comfort, technology, and fuel efficiency. But it got a lot more than new jet technology. Airbus will train United pilots and mechanics. The clincher: Airbus will allow United to walk away from its lease on just 11 months' notice, insiders say, which reduces the airline's financial liabilities. With a BBB- credit rating from Standard & Poor's Corp., UAL needs the help.
For Airbus, the deal means that virtually every major U.S. airline--USAir Inc. is the exception--now flies Airbus jets. Even better, it makes the A320 a real player in the North American market. The jet has had three accidents, and controversy still swirls over its computerized fly-by-wire system, which keeps the plane on course, but takes much of the decision-making out of pilots' hands. United's purchase "confers credibility on the A320 in a fashion that Airbus couldn't have done otherwise," says James M. King, chief executive of GPA Leasing in Ireland.
It has been a long trek. Until about 1985, Airbus tried to crack the U.S. market with a plain technology strategy. To make it work, Airbus virtually gave planes away--to ailing Eastern Air Lines Inc. in 1977. Then it sat back, assuming other U.S. airlines would beat a path to its door. Problem was, U.S. aircraft buyers and sellers are part of an old-boy network. Huge bets on equipment are counterbalanced by promises of financing help and service. Airbus didn't know how to play, and its airplanes came with few service guarantees. The strategy bombed, leaving Airbus officials "in a state of shock," says John J. Leahy, Airbus' senior vice-president for marketing.
`WOEFUL THIRD.' But North America accounts for 45% of the world market, and no manufacturer can be a major player without being a major player there. So Airbus regrouped. It's first step: Get local. In the mid-1980s, North American Chairman Alan S. Boyd hired James A. Bryan Jr., an airline leasing vet with solid industry contacts, and Leahy, an experienced salesman (table). They hired salespeople with experience in the fast-moving U.S. market.
Service came next. In the past, Airbus was hard-pressed to compete with Boeing Co., which could fix a plane within hours, anywhere in the world. Airbus had only a small service facility in the U.S. Airlines that needed parts often had to wait 24 hours to get them from France. Pan Am even threatened to return planes to Airbus, citing the parts problem. Bryan made big changes, opening a mechanics' training center and developing a parts distribution center with $125 million in stockpiles.
The moves paid off. American Airlines Inc., which became a customer in 1987, used to rank Airbus a "woeful third" out of its aircraft suppliers, says Robert W. Baker, American's executive vice-president of operations. It trailed its competitors' delivery times on parts, quality of material, and pricing of material. Now, Airbus is No. 1. "At our behest, urging, and pounding, they set out to fix that problem," Baker says.
With United in its fold, Airbus has really come of age. Or so figures 51-year-old CEO Jim Bryan. That's why, he says, he's leaving. Days after Airbus announced its United deal, Bryan announced his resignation. His successor's job: to keep those hard-won customers coming back for more.
MARKETING MAGIC: HOW AIRBUS INVADED NORTH AMERICA FIRED-UP FLEET Responding to customer needs, Airbus in 1985 began adding longer-range, more powerful, and fuel-efficient planes to its product line INSIDE TRACK Chairman Alan Boyd expanded sales staff with industry insiders, including James Bryan, an aircraft leasing vet, and John Leahy, a former Piper Aircraft salesman KING CUSTOMER In 1988, Airbus opened a mechanics' and pilots' training center in Miami and, in 1991, a new parts warehouse at Washington's Dulles Airport. Both are crucial to a new emphasis on quick, reliable service EASY TERMS Airbus' innovative financing drew new orders. In 1990, Northwest got a $500 million low-interest loan in exchange for an order. The recent United deal lets the airline walk away from its lease with just 11 months' notice DATA: BW