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Key Airbus Board Meeting Could Shake Up Planemaker

Dec. 13, 2017
At the top of the agenda is the fate of CEO Tom Enders, who recently warned employees to expect serious consequences from a probe into potential incidents of corruption and who is not expected to stand for a third term.

Airbus SE will hold a board meeting Thursday that could prove pivotal in determining the future direction of the European planemaker as it prepares for hefty fines stemming from bribery allegations.

At the top of the agenda is likely to be the fate of CEO Tom Enders, who in October warned employees to expect serious consequences “including significant penalties” from a probe into potential incidents of corruption relating to the use of middle-men in defense deals.

Enders is set to tell the board that he doesn’t plan to stand for a third term when his current mandate expires in 2019, French newspaper Le Figaro reported, without saying where it got the information. That would spark a leadership contest just as Airbus grapples with the bribery investigation and whether to scrap its flagship A380 superjumbo model amid sluggish demand.

The possibility of Enders leaving raises the question of whether estimates regarding the size of likely settlements with prosecutors in countries including France and the U.K. are too low, Kepler Cheuvreux said Wednesday in a note. Its target price for the stock assumes a penalty provision of 2.5 billion euros ($2.94 billion).

‘Serious Enough’

“Our view has always been that a leadership change should not be made now, unless there is a real case for it,” Paris-based Kepler analyst Christophe Menard said in the note. “The corruption allegations could therefore be serious enough to warrant such a change.”

Rainer Ohler, a spokesman for Toulouse, France-based Airbus, called the Le Figaro report “pure media speculation,” while Enders said his contract should be determined in joint consultations with the board.

“The decision about my future as CEO of Airbus is not taken by the French press or the French government or any government,” he said in an emailed statement. “My current mandate runs until April 2019 and this is the timeframe I work against.”

Airbus can’t afford to let the succession issue drag, since finding a new CEO could take time. Candidates might include Patrice Caine, CEO of avionics specialist Thales SA, and Thierry Breton, who heads digital services and outsourcing company Atos SE, according to Le Figaro. The group reports full-year earnings Feb. 15 and is due to hold its annual investor meeting in April.

Share Advance

Enders, a one-time German paratrooper who turns 59 this month, rose through the ranks at Airbus and was appointed chief in 2012 after previously running the commercial plane-making unit — the usual springboard to the top job at what is one of Europe’s premier manufacturing companies.

Airbus shares traded 0.8% lower at 86.49 euros ($101.70) as of 1:36 p.m. in Paris. Even with the swirling allegations and issues with ramping up production of the A350 and A320neo models, as well as the question-marks over A380, the stock has advanced 38% this year, reflecting the extent of the jetliner backlog and valuing the business at 67 billion euros ($78.78 billion).

Running Airbus comes with political baggage, as both the French and the German governments own stakes in the company and closely monitor the balance of power. This means that the nationality of the CEO and commercial-aircraft chief typically alternates between a Frenchman and a German.

That would make Chief Operating Officer Fabrice Bregier, who heads the planemaking arm, next in line to take over from Enders, but he could be overlooked in favor of another Frenchman and may also leave, Le Figaro said. Airbus said the reports on Bregier’s future were, again, “pure speculation.”

Blocked Deal

Enders has attempted to turn Airbus into what he has called a normal company, no longer tied to the political whims of its biggest shareholders. The push followed his unsuccessful attempt to combine Airbus with U.K. arms company BAE Systems Plc, which was blocked amid German government opposition.

The CEO’s commercial forays have been more successful. Under his watch, Airbus launched an upgrade version of the A320 single-aisle aircraft, turning the so-called Neo into the fastest-selling jetliner in history. He also oversaw the launch of the A350 wide-body, though both models have had teething troubles after entering production in recent years.

The A380 double-decker, hatched before Enders took over, has been a commercial flop, struggling to win a broad base of customers. Airbus has been holding out for a follow-on order from Dubai-based Emirates, the model’s biggest buyer, but in the absence of a deal has been forced to cut build rates.

A reduction to eight planes a year in 2019 — down from a forecast 15 this year and 28 in 2016 — was flagged in July, while Reuters reported this week that a cut to just six annually was under consideration. Those figures may be a further thorny topic for the board meeting.

Airbus has already seen an overhaul of its senior management ranks.

Marwan Lahoud, its head of strategy, departed last year, while John Leahy, the head of sales and a fixture at the company for decades, announced his decision to retire a few weeks ago. Airbus picked an external candidate, Eric Schulz from Rolls-Royce Group Plc, to succeed Leahy, highlighting how the company is keen to inject fresh blood into the group.

By Ania Nussbaum and Christopher Jasper , with assistance from Benjamin Katz.

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