Airbus' global restructuring to boost competitiveness

Aviation giant hopes move will benefit helicopter, defense units

Airbus Helicopters' display at an aviation expo in Beijing in September, when the unit was still known as Eurocopter. Airbus hopes the name change will allow it to capitalize on its brand recognition as it attempts to expand its market share in China. Provided to China Daily

Laurence Barron is exhilarated to have the Airbus logo back on his business card.

The commercial lawyer-turned-aviation veteran, who served at Airbus SAS for more than 30 years, was appointed chairman of EADS China at the beginning of 2013.

Like his predecessors, Barron had to explain to numerous local government officials the nature of EADS - the parent company of Airbus, Eurocopter and the lesser-known space and defense technology providers Astrium and Cassidian.

But that's not the case anymore.

The European aerospace giant changed its name to Airbus Group on Jan 1. By shedding the former indistinctive corporate name to adopt that of its better-known passenger aircraft division, the group hopes to boost its global profile and competitiveness.

The group will also combine its space and defense entities into one division - Airbus Defense and Space. Its helicopter business will be renamed Airbus Helicopters, while the commercial aircraft unit will keep the Airbus name.

"We're making our organization easier to understand for ourselves and for the outside world. And more important, we will improve efficiency and reduce costs by making our organization leaner and creating synergies between divisions," Barron said.

The main catalyst for the restructuring project was the flat or even shrinking defense and space budget in Europe, which is forcing the company to focus increasingly on export markets and creates an urgent need to improve access to international customers.

The restructuring project will result in 5,800 job cuts at the defense and space division and corporate headquarters in Europe by the end of 2016. No jobs will be eliminated in China, Barron said.

Laurence Barron, chairman of Airbus Group China

In China, the company will move its helicopter and defense/space offices from the downtown area to the Airbus campus near Beijing's airport by the middle of 2014. The three divisions will share centralized services, such as finance, HR and communications.

"We will have a simple structure with one name, under one roof and shared services," said Barron, who personally started the relocation project four years ago when he was Airbus China president.

Globally, Airbus contributed about 70 percent of the group's earnings, which stood at 56.5 billion euros ($77.66 billion) in 2012. In China, Airbus is even more dominant with a 97 percent contribution to earnings.

Despite huge potential, China's civil helicopter market is still fledgling. A major constraint is airspace restrictions and the resulting lack of air and ground services. The defense and space business is even more restricted due to the European Union's arms embargo on China and its controls on technology exports.

However, Barron expects revenue from the helicopter division to increase significantly in coming years.

"The next 10 years for Airbus Helicopters in China will be a bit like the last 10 years for Airbus. We expect Airbus Helicopters to take a significant share in China, as we've seen tangible signs of opening up the lower altitude airspace for general aviation," Barron said.

Chinese carriers now operate more than 1,000 Airbus aircraft, accounting for 50 percent of the total planes in service. The company sold its first plane to China in 1985 - Boeing Co had a 13-year head start - and set up its Chinese subsidiary in 1994.

The European company has also sold more than 180 helicopters across the country. Its revenue reached 90 million euros in China in 2012, up 54 percent year-on-year.

The Civil Aviation Administration of China and the People's Liberation Army jointly released regulations in November stating that general aviation flights that don't affect national security will now be subject to approval by the CAAC, not the military. That was considered a major step toward opening up the nation's low-altitude airspace. With the exception of some commercial air routes, the Chinese mainland's airspace is under the administration of the Air Force.

Once the low-altitude airspace regulations are relaxed, China could rapidly become the world's largest helicopter market due to huge demand from sectors such as offshore oil and gas exploration and tourism.

China had 298 civilian helicopters registered with the CAAC by the end of 2012, and the country is expected to have 1,500 civilian helicopters in the next 10 years, Xia Qunlin, deputy general manager of Avicopter Co Ltd, a joint venture between Aviation Industry Corp of China and the Tianjin municipal government, said at an industry forum earlier this year.