European aerospace giant, EADS (European Aeronautic Defence and Space Company) is set to restructure itself under the Airbus brand. In an interview with Business Line, EADS chief executive officer Thomas (Tom) Enders , talks about what it means to the company and how India will play a major role for the aerospace major .

Excerpts from the interview:

EADS is set to go through a massive restructuring exercise. Why?

It was long overdue. Two thirds of our total business comes from commercial aviation. However, defence business is not that small. Cassidian has roughly Euro 6 billion in revenues same as the space business and Airbus Military has around Euro 2 billion. But we have parts of the defence business in all the divisions.

We decided to consolidate that business to one division together with the space business because we have some overlap there too.

The resultant Defence & Space division will have close to Euro 14 billion in sales. The target is to become more competitive in markets outside Europe. Our defence business today is predominantly focused on Europe.

You called the exercise a major evolution…

It is another important step. Restructuring will lead to a combined Defence and Space division. We are also renaming the entire group as Airbus. We have had a confusion of Babylonian proportions.

We have EADS, Eurocopter, Airbus, Astrium and Cassidian. We chose to take the name of the strongest and most internationally known brand -- Airbus -- for the entire group.

Will the other divisions be renamed as Airbus?

We are adopting the Airbus brand for two reasons. Two thirds of our revenues come from Airbus commercial aircraft business and it is growing. But the defence business growth is flatter. Under the Airbus brand, it will become easier to integrate and all the 1,44,000 Group employees will be Airbus employees. Eurocopter will also be renamed as Airbus Helicopters. We will surely not call them Airbuses (laughs). Eurocopter decided to do this on its own. I didn’t force them to do so. Overall and in the longer run, they will do better if they run as Airbus Helicopter than under the Eurocopter brand. Euro does not win us that much sympathy in the rest of the world.

Is the plan to open a plant in Alabama part of this exercise?

Five or ten years ago, we were much less international than we are today. We have around 90 per cent of our employees in Europe and more than 10,000 employees are outside. But we want to do well in other parts like India, US and China.

Are you looking at emerging economies for setting up a manufacturing plant?

We started with an Airbus Engineering Centre in Bangalore in 2007 and we are very happy with the way it has developed. The engineers working here are highly respected by their peers in Europe. Few years ago, we also started the Cassidian Engineering Centre, the first defence-related engineering centre in India owned by a foreign company here in Bangalore. We are thinking about the manufacturing activities in India as well. But we will do that step by step.

Airbus and Boeing might have competition from regional players in China, Canada and Russia who are working on single aisle commercial aircraft.

It has only been in the last 20 years that there has been a duopoly: Airbus and Boeing. When Airbus was created in 1970, there was Boeing, Lockheed and McDonnell Douglas. Only after the latter two disappeared, there was a duopoly. You are absolutely right. The 150-seater with the 919 (of China) goes directly against the 737 family of Boeing and the A320 family of Airbus. The Russians are also developing an aircraft (MS 21) and Bombardier is encroaching into the territory with their C series. The Embraer of Brazil has been prudent enough to stay out of this. We do expect the duopoly at some point of time to be over. The entry barriers are high and money is not everything.

One is witnessing an increasing reliance by both Airbus as well as Boeing on Gulf carriers.

If you actually look at it, our dependence on Gulf carriers overall is not that strong. Our order backlog in the Gulf area is about 8 per cent; it is not 50 per cent. We have a far stronger order book in Asia Pacific that includes India. I do know this question keeps coming up about overdependence on Emirates, but then it is a nice problem to have. The Emirates is the largest airline in the world. You would rather be more dependent on strong airlines rather than on perhaps smaller and fragile airlines. At the same time, we have a very strong spread of airline customers across the world.

Both Airbus as well as Boeing have been making forecasts about the number of aircraft India will need. But the current scenario does inspire confidence.

The confidence arises from the potential that such a big market can offer. I guess the challenge in India is that it is pretty difficult for an airline to be profitable here. Lots of burden is put on the airline sector here, taxes in particular. Only the best can manage to run under the current circumstances profitably. There are hardly any countries in the world where flying is as heavily taxed as in India. The Indian market has a huge potential, provided the environment for commercial aviation is improved. We estimate in the next 20 years, India will need around 1,200 aircraft. Just for comparison, we estimated 1,000 aircraft for Germany for the same period but that country has only 80 million people and a very mature civil aviation sector.

How optimistic are you about the Indian Defence sector?

Defence is different from commercial aviation. When we negotiate with the airlines, it takes perhaps three months to close a deal. The defence deal can take three years to five years and even longer and it is not just in India -- such things happen. We are optimistic one way or the other we should be able to win additional business here. Our company, Cassidian in Bangalore, is developing certain components and systems, all made in India. We spend more than Euro 3 billion per year on R & D. We want to carry out innovation in India as there are very good engineers particularly in Bangalore.

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