Airbus CEO talks disputes with Boeing, a new Chinese rival, and hydrogen planes

Airbus CEO Guillaume Faury attends Airbus's annual press conference on Full-Year 2019 results in Blagnac near Toulouse, France, on February 13, 2020. Photo via Regis Duvignau/Reuters.

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Wed, May 5, 2021

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Event transcript

Guillaume Faury
Chief Executive Officer, Airbus

Frederick Kempe
President and Chief Executive Officer, Atlantic Council

FREDERICK KEMPE: Today we turn to focus on the economic perspective. We just heard from European Commissioner for the Internal Market Thierry Breton. And now I have the privilege of sitting down for a discussion with one of the world’s premier business leaders, Guillaume Faury, chief executive officer of Airbus.

So, Guillaume, it’s wonderful to have you with us. There is, I think, some rich symbolism of having you join us after Commissioner Breton of France—a Frenchman—and the head of the German Green Party who will follow, Annalena Baerbock, in her first interview since she was chosen as the party’s candidate for chancellor. I’m delighted that we’re going to talk about the transatlantic economic relationship as a driver for recovery from the pandemic, and also how your company has weathered a crisis that’s hit your industry rather hard.

So, Guillaume—and I’ll make this introduction short—Guillaume has been the CEO of Airbus since 2019. He’s a member, and we’re proud to say that, of the Atlantic Council’s International Advisory Board. Guillaume, your love of flying and aviation dates back to your childhood, as I understand it. And what’s more, he is even a qualified light aircraft pilot and helicopter flight test engineer, with 1,300 hours of flight experience. So, with that, I think that should elevate our conversation.

I encourage everyone to follow along in the discussion but using the hashtag #EUFF on Twitter, and asking questions via our Atlantic Council events app, which you can download from either the Apple app marketplace or Google Play store. So with that, Guillaume, let’s begin, and thank you again for joining us for this forum.

First, maybe a bit of a situation report. You’re more the expert than I am, but it seems to me that COVID-19 is the biggest crisis the modern aviation industry has ever faced, and perhaps for Airbus specifically as well. Can you talk about that, and also how you’ve adapted?

GUILLAUME FAURY: So, first of all, good morning, Fred. It’s my privilege to be with you this morning on your side of the pond.

Indeed, you’re right. COVID-19 has been, for aviation, the biggest crisis ever since the outset of this great industry. It’s been brutal, and even more brutal that we were in a big ramp-up at that time. Our supply chain, ourselves were investing for more production moving forwards, and we had to face a brutal reality of the vast majority of the commercial planes around the world being grounded more than a year ago.

We started by trying to face reality as well as we could. At that time, we worked on scenarios trying to understand how long the crisis would last. I have to confess probably March last year we didn’t think we would still be in that situation today, more than a year later. So we worked on scenarios and we decided very quickly to reduce our production by 40 percent, assuming that deliveries would recover to a certain extent and then match with this new production rate. We worked with the supply chain to reorganize everything to fit with this new level of production. We worked with all our customers around the world to try to understand their new situation—how to defer planes, to adapt pre-delivery payments. And it was a hell of a lot of work, basically, to try to rebuild everything. We had, as well, to protect our employees, find new ways of producing planes with the COVID-19 constraints. And I would say after our first half of the year, where we lost a huge amount of money, we stabilized the situation in the third quarter and we started to make money again in the fourth quarter, and in 2021 as well in the—in the first quarter.

Obviously, having reduced our expenses very much, we have also reduced the workforce. But we have found ways to sort of limit the impact of the pandemic and the crisis on the workforce. And we are now prudently looking at the end of 2021, 2022 with the potential to start to ramp up again from that low point for what we call the single-aisle, so the narrow-body planes. For the long-range planes and from the long-range business for airlines, we think the tipping point will probably not be before mid of next year as the different countries of the world, the different regions of the world are really managing the situation in very different ways. It will take a lot of time to reopen.

So that was last year. I have to say the solidarity of the supply chain of aviation has just been amazing to try to go through that crisis, to weather the storm together. And we are slowly but surely making progress with the hope that aviation—air traffic will start again to pick up moving closer to summer 2021.

FREDERICK KEMPE: Thank you so much for that fascinating opening answer, looking to a ramping up of some sort on shorter range at the end of this year, early next year, and then longer haul middle of next year. But you did talk about how the pace is different in different places, and the United States at this point with vaccinations seems to be far ahead of Europe. The full return to flights seems to be coming here faster, but we also see trends in India and otherwise other places that could make us a little nervous about that. What will—and also, news on this side of the Atlantic, this side of the pond, Guillaume, of deliveries to JetBlue that I’ve read about Airbus in the last—so the US is ordering and taking delivery of new planes. What is it going to take to get Europe back? And in general, as you’re seeing the new variants come out of COVID, how worried are you about setbacks in the months ahead that make it so you can’t hit the targets you’re talking about?

GUILLAUME FAURY: Well, we are a sort of long-term industry and we need plans over many months, over years, and the pandemic is not providing this visibility. Therefore, we have to prepare ourselves for more resilience than what we’ve seen in the past.

It’s very refreshing to see the situation in the US moving very quickly in the right direction. There is a sentiment of optimism in the US that I like very much, and it’s true that the vaccination campaign has been very efficient, very fast. But it also a good signal for the other countries, for the other regions in the world. I mean, when the vaccination campaign starts to reach a certain point, then the contamination goes down. Economy can reopen. Activity can start again. So I’m hopeful that Europe—and we started later, with a lot of issues on the coordination among the countries. And I had my frustrations on the—on the situation in Europe. But I think the US is showing the way. The vaccination campaign in Europe as well is making good progress now.

And I am quite optimistic, hopefully at least, that Europe will follow US, probably with a couple of months of delay, but will be later. If we can be in the same situation for the summer, and have a good summer, a reopening of the majority of businesses, I think the pent-up demand is very strong in Europe as well, and people are willing to start to live again. They are expecting more freedom than what they have today. They know we need to put the pandemic under a certain level of control. And they believe, and I believe, the vaccination campaign is the way to get there, because when we look at the US that’s the case. So hopefully we have US, Europe, other parts of the world following. Then we have reopening of the majority of businesses, including aviation. And that will be the start of the end—the beginning of the end.

FREDERICK KEMPE: So I think you know, Guillaume, how devoted the Atlantic Council is to the transatlantic community—the transatlantic economy. It’s sort of the centerpiece for the world economy. And we’ve long believed that this dispute between Airbus and Boeing hurts everyone, in a way, in the global competition. But what was encouraging was that the US and the EU entered a four-month suspension of tariffs related to the Airbus-Boeing dispute. And the US trade chief recently proposed a six-month tariff freeze. But these are still short-term measures. And I’m just wondering what you see as the prospect for a longer-term solution to this issue, and how important do you find this whole matter for the economy in general?

GUILLAUME FAURY: Thank you for the question, Fred.

I think aviation is mainly a North Atlantic ecosystem. We also buy from the US a lot. The US companies and Boeing buy from Europe. We sell to Europe, to the rest of the world, to the US, and vice versa. Additionally, to small business. I mean, before the pandemic we were delivering altogether—Boeing and us and all the suppliers contributing to it—around—up to 1,500 planes a year. So that’s very small, actually, in terms of the numbers. And of course, last year we did even hardly half of these numbers.

So it’s a small ecosystem and it’s a North Atlantic ecosystem. And putting trade barriers, putting tariffs in the middle of the Atlantic in my view—and I’ve been quite transparent on that a bit from the beginning—is not making sense. I think escalation of the tariffs and the decisions of the WTO, we are now in a situation where it’s really our view that this is a lose-lose situation for everyone. And we are much better off finding a resolution to the dispute. So I’m happy to see that on both sides. There is what I believe, what I perceive as a real intention to find a resolution. There are some subsidies, and there have been subsidies in the past on aviation—both sides of the Atlantic in different ways. Obviously, each side believes the other way is not the right one. So we need to come to a situation where it’s more acceptable for both parties and move forward.

And the situation today is even more unfortunate that we have COVID-19, and that we are in a very difficult situation. So I trust the short-term situation you were mentioning before—the short-term ceasefire is the way to find a resolution and then go to a more long-term situation. And it will allow us to address other challenges, other players, newcomers that come also with some strong support from their states. And I think it is the interest of both the EU and the US, and Boeing and Airbus, to find an agreement and to move forward.

FREDERICK KEMPE: I don’t want to press you too hard on this, but what are the prospects for that long-term solution? It’s taken us a long time to get here. How long is it going to take us to get out of this dispute?

GUILLAUME FAURY: I believe it’s just a matter of willingness. I don’t see any obstacle that cannot be resolved in the disputes. It was a long-term situation that developed over fifteen years. No party was willing to accept the situation imposed by the other one. So—but I think looking at the consequences going up, I think everybody understands it’s better to find an agreement. So there will be an agreement. There was an agreement, by the way, fifteen years ago. You remember, there was a substantive agreement between Boeing and Airbus that worked for more than a decade, I think.

So it’s not something that cannot be resolved. And if the EU and the US have the willingness to sit down and look at the situation and agree on what can be acceptable and what is not, even if it has a different flavor of both sides, I think it’s just a matter of willingness. So I’m very optimistic that now that we see on both sides a willingness to get to that deal, that we’ll get it. And by the way, going back, the situation with tariffs will really be meaningless for both Boeing and Airbus, and all the other industries which are impacted. So that’s another reason why I’m quite optimistic.

FREDERICK KEMPE: Thank you so much for that, Guillaume.

Let’s talk a little bit about China. Thierry Breton, the European Commissioner, spoke about it. He spoke about clean networks and 5G. If I’m not mistaken, and you can correct me if this is wrong, you sell 25 percent or more of your planes in China. Maybe during COVID-19, coming out, that could grow. How important is that market for Airbus? And how do you see it developing in the years ahead?

GUILLAUME FAURY: The Chinese market, be it for Airbus or Boeing, was sort of 20-to-25 percent of the global market in the past three or so years. As far as I remember, last year—2020—for us it was around 20 percent, maybe slightly less than 20 percent, in terms of number of deliveries out of the 566 planes we delivered last year. And we think China will remain a very important market moving forward on the planet. As we have today, mainly two commercial airplane manufacturers that are competitive, Boeing and Airbus, this Chinese market is shared between the two players in different ways on the single-aisle and the wide bodies.

But I’m just trying to say basically it’s been an important market. It will remain an important market. It will progressively come with domestic products. You know, that COMAC is developing the 919 that will be a single-aisle product entering into the market probably next year or the year later. It will start slowly, probably reaching at the beginning only the Chinese airlines. But we believe this will progressively become a decent player. So we will grow probably from a duopoly to a triopoly, at least on the single-aisle, by the end of the decade. And therefore, Chinese markets, even with this new player, will continue to be for Boeing, for Airbus a very important market to address.

FREDERICK KEMPE: So by the end of the decade there’s going to be Airbus, Boeing, and a Chinese rival. It would a triopoly instead of a duopoly, in your view?

GUILLAUME FAURY: That’s not—that’s not an unlikely scenario. It’s still difficult to say at what stage and what level of competitiveness COMAC will be able to introduce the 919 in the market. We believe they will start with China, because the Chinese airlines are state-owned companies and it’s easier to do it. It takes a lot of time to demonstrate the maturity of a product, to make it reliable, trusted, and economically viable. But we believe it’s not unlikely on that on the single-aisle by the end of the decade COMAC will have taken a certain share of the market.

FREDERICK KEMPE: Thank you for that.

You spoke earlier about supply chains and how they’ve held up in aviation. If you look at the auto industry, it’s a nightmare right now with semiconductors and shortages of semiconductors. Could you compare what’s happened in the aviation industry? Have you—what issues have you had during COVID-19 with global supply chains? How do you think they’ll change going forward?

GUILLAUME FAURY: We have looked very seriously and very deeply to the supply chain during COVID-19, and we continue to do it. We’ve put in place with other companies, other OEMs what we call watchtowers, with two main objectives. One is to get transparency and anticipation on the evolution of the situation of the suppliers not to be in a situation that—what you’re describing with semiconductors in the car industry. And we have, as well, equipped ourselves with—I mean, with funds or with tools to be able to intervene with equity on the suppliers that would potentially be in a very difficult situation.

What we’ve done, as well, on the other side, we have done our very best to provide visibility on the levels of production that will be expected on our planes and try to be as stable as possible to give the opportunity for our suppliers to plan, to execute, and to be able to be resilient in that crisis. For the moment, it has been quite successful. I remain very prudent and humble because we see the situation is still evolving very quickly. We’ve seen with India—I think you referred to it—a big change, a drastic and fast change on the situation, so we remain quite prudent.

And if I have to give an appreciation, a sentiment on the state of the supply chain today, I think we have not a situation similar to what you mentioned before. The majority if not all suppliers have found ways to weather the situation. There are some exceptions and we are dealing with them, but generally speaking the aviation supply chain has managed to survive the situation and not impact the OEMs in a way that would prevent us from delivering planes.

So I remain humble because things can change very quickly. We’ve seen that what happened on the car industry was not on the radarscope a couple of months before it happened. That’s why we have the watchtowers and we are trying to anticipate as much as we can, gaining visibility. But again, prudently, I can tell you today we don’t see a similar situation in aviation, at least not for the moment, and I hope it will stay like this.

FREDERICK KEMPE: Well, thank you very much for that.

My next question might have even been at the center of a conversation I would have had with you a few years ago, when Airbus was competing for a Pentagon tanker contract, and we all remember back to the disappointment at that time for Airbus. But what do you see as the outlook for transatlantic defense cooperation?

GUILLAUME FAURY: It’s a cooperation in the sense that the US and the European countries are together in NATO. NATO is probably the strongest alliance we’ve ever been in, at least in the recent history, and it’s very important that both the European countries and the US continue to contribute to NATO.

When it comes to defense, European countries are buying US goods, US products. They have done it in the past, but Europe wants also to reinforce its own defense industry. I think it was very much supported by the president, the administration in the US that pushed Europe to take probably more care of its own sovereignty, and we believe at Airbus that it was a good move for Europe. We think it will continue, but with probably a more longer perspective, a US that is seen from Europe as more cooperative with this Biden administration than it was the case with the previous one.

And at the end of the day, the situation is such that we are competing and cooperating. And that’s the very nature of the transatlantic relationship, is that we have competitors, both sides. It’s a tough competition. It think it’s very healthy as long as we have a level playing field and that it’s an amicable competition. And when it comes to defense, as we are together in NATO, yes, there is a tough competition. We want the rules of the games to be fair, both sides. And what we really didn’t like in the case you reminded us just before is we had the feeling it was not completely a fair competition. But when it’s a fair competition, it’s healthy and it’s OK, and it’s helping both sides to develop more competitive products.

Now, I think deep cooperation between OEMs, between companies both side of the Atlantic, is not that easy. So we buy from each other. We buy components. But large corporations are more frequent in Europe between European countries than across the Atlantic for the reasons I tried to mention before.

FREDERICK KEMPE: So just looking to the clock and knowing we don’t have that much time left I won’t drill down so much on that issue, but we certainly at the Atlantic Council hope for deeper transatlantic defense cooperation. And so looking for ways to achieve that will be in our interest.

But I’d like to turn to green technologies. It’s one of the—one of the areas where I’ve been watching Airbus closest, and you recently made a big announcement about the role hydrogen could play. I think you spoke of full hydrogen planes by 2035, and that was way ahead of where I think the thinking has been on this side of the Atlantic and also within Boeing. Tell us why you’re so confident of that and where things are going in terms of green technology and aerospace.

GUILLAUME FAURY: We’ve always been very focused on environment, but even more recently than in the past because of the trend becoming bigger and bigger, and probably also the feeling of urgency with climate change and the global warming being stronger every day. There are short-term, mid-term, and long-term measures when it comes to bringing the solutions to the market.

On the short term, the best way to reduce the emissions is to replace all planes that have a much higher, a much bigger fuel burn by modern ones, which are by far more efficient and therefore release less CO2 per passenger and per kilometer.

Then, on the short term/mid-term, we have the opportunity to work with sustainable aviation fuels. And together with the airlines—I think together with Boeing, by the way, on that front—we believe the SAFs are the avenue for the next years. The planes we are delivering are today all very capable of—

FREDERICK KEMPE: And for an audience that doesn’t know what a SAF is, could you translate S-A-F for us?

GUILLAUME FAURY: Sustainable aviation fuel. OK.


GUILLAUME FAURY: These are biofuel or fuel which have very low-carbon content. Thank you, Fred, to remind me.

FREDERICK KEMPE: I’m sorry to have interrupted. Yeah.

GUILLAUME FAURY: Thank you for that.

But the sustainable aviation fuels are a very good short-term/mid-term solution. But we believe on the long term we have to find ways of not emitting any carbon in the atmosphere. A solution that is net zero is not enough. And to go to that point, we come to the conclusion that hydrogen is one of the solutions, if not the solution.

On top, we see a very strong momentum for hydrogen from many other industries as a way to store intermittent energies like solar, like wind energy, and this will be required. So we see a convergence. We are using hydrogen on our rockets, on our satellites. This is liquid hydrogen. I was in the car industry a decade ago and we see the car industry, the truck industry going to hydrogen, and we think that’s really a strong opportunity.

That’s why we’ve put the hydrogen plane very high on our agenda. It’s not the only answer, and it’s more a long-term answer. We are fully cognizant of that. But we think that’s a fantastic opportunity for the long term to have aviation not only—being the only mode of transport to not impose anything on the ground. You don’t need an infrastructure on the ground. You don’t need to damage the ecosystems on the ground. You fly in the air. But on top, not releasing carbon in the air.

There are engineering challenges. There are technological challenges, that’s for sure. But we don’t believe—we believe they will be overcome. And we see the timeframe to 2035 a very credible one. So we think on the plane side it will be OK. Where we need, as well, large quantities of decarbonized fuels, even e-fuels or hydrogen. The e-fuels are one sort of sustainable aviation fuels, artificial ones. And we will need regulation. We need a global framework for aviation.

In that sense, we very much welcome the momentum given by Joe Biden and the administration to be back to the Paris agreement and to put the bar very high. So if we have US, Europe, and potentially China joining to create this level paying field for carbon in aviation, then we will have the means to invest on technologies to bring decarbonized planes and to contribute to aviation for the future in a climate-neutral way. So that’s why we are very adamant to see hydrogen on planes.

FREDERICK KEMPE: And just very briefly to close, is there a chance for Airbus to engage in transatlantic cooperation with, as you said, the Biden administration being so for this? So not just countries around the world, but your company in transatlantic cooperation on green technology across the Atlantic?

GUILLAUME FAURY: Yes. Yes, of course. And we are not always well understood as Airbus. Sometimes from the US we are seen as a European Boeing. That’s not what we are. We are a more global company. We have assembly lines, activities in the US big time. We buy a lot in the US We sell in the US So we are a very strong player in the US And we are already coordinating with US industry big-time.

So for this fantastic challenge that is the decarbonization of aviation, the climate agenda, we look forward to more cooperation with US partners, with the US administration, why not? We want to be understood for what we are, a very strong player in the US, for the US, with employment in the country in the satellite business, in helicopters and, of course, on the commercial airplane. We have assembly lines for the 320 family, for the A220 in the US. And that’s what we are. So we are already cooperating and we are very much willing to cooperate even more in the future.

FREDERICK KEMPE: Guillaume, it has been a delight to fly through this half-hour with you with such a fascinating conversation. And thank you so much for taking the time for the EU-US Future Forum. And I hope the next time we’ll see each other in person.

GUILLAUME FAURY: My great pleasure, Fred. Looking forward to seeing you soon.

FREDERICK KEMPE: Great. Thank you. Bye-bye.

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