MUNICH — Airbus Defence and Space, formerly named Astrium, rendered homage to its newest commercial launch competitor, Space Exploration Technologies Corp. (), saying the Hawthorne, Calif., company has been able to retain a focus on cost efficiency without veering off into fascinating but unnecessary engineering challenges.
Company officials also described how it will use the reorganization inside the Airbus Group — the new name for the former EADS and Europe’s biggest aerospace company — to find synergies between the construction of Earth observation and telecommunications satellites, and between electronics components for military aircraft and for satellites, to improve profitability.
Airbus Defence and Space includes the former Astrium, Cassidian and Airbus Military divisions of Airbus Group.
In informal briefings here Dec. 18, conducted with the agreement that no company officials would be named, company managers discussed why they plan more workforce reductions and what they expect from their core European government customers.
One official said to expect Airbus Defence and Space to be much more aggressive on export markets despite the occasional disadvantage of working in euros as compared with U.S. dollars.
“We will not lose on price,” promised this official. “We’ll get our costs down to competitive levels and we will not lose on price. We’ll win on performance.”
How that promise will work into the company’s portfolio is unclear. The remarks came the same day the Brazilian government selected Sweden’s lower-cost Grippen fighter jet over Airbus’ Eurofighter.
Countering the negative effect of the euro, an official said, is the fact that some nations currently would prefer not to conduct defense and space business with U.S. contractors. “This can certainly play to our advantage in the current environment,” the official said.
The hat tip to SpaceX, which on Dec. 4 successfully launched its first mission for a large commercial satellite fleet operator,of Luxembourg, was perhaps the most surprising of the comments.
“They have been able to work on industrialization of the Falcon rocket without being waylaid by development issues,” said one Airbus official, whose company is prime contractor for Europe’s Ariane 5 rocket.
“They needed nine times the power of their Merlin 1D engine for their intended markets. In Europe we would have attacked the issue with a beautiful [research and development] program, costing hundreds of millions, to develop an engine with nine times the power. What did SpaceX do? They put nine Merlin engines on the Falcon 9 first stage. The result: Problem solved.”
An official said Airbus Defence and Space sent two of its best engineers to SpaceX sometime back to take a close look at the Hawthorne operation and to return with an assessment of whether the SpaceX way of business withstood harsh scrutiny.
“They came back and told us: ‘Yes, they’re going to do it,’” said one official. “When you consider who these guys were — one was our former chief technical officer, Robert Laine — we pretty much knew then what to expect.”
Airbus Defence and Space’s Space Systems division is under pressure to design a next-generation Ariane 6 rocket that can be manufactured and launched for 70 million euros ($96 million) while carrying a satellite weighing between 3,000 and around 6,500 kilograms.
The vehicle’s basic design will not be as difficult a challenge as reorganizing the current Ariane 5 industrial landscape, including dozens of companies in a dozen European nations, to meet the cost objective.
“It’s a difficult issue,” one Airbus official said. “We need to redesign the entire Ariane ecosystem of companies that build Ariane and reduce the number of companies that are involved. It’s the only way to reduce costs and fend off SpaceX and others.”
As a satellite and space-component manufacturer, Airbus Defence and Space currently has a 60 percent share of the business contracted by the 20-nation European Space Agency (), company officials said.
Keeping that market share will not be easy given the heightened competition to come from space-budget stagnation in France and minimal growth in Germany, Europe’s two biggest space powers.
Airbus’ predominant share of the fast-growing British space market is coming under attack as competitors set up divisions in Britain to capture a share of the increased spending.
Airbus Defence and Space will also have to contend with the fact that the two most profitable divisions of the former Astrium — services and components — have been moved outside the Space Systems business.
Astrium Services is now inside Airbus Defence and Space’s Communications, Intelligence and Security division, managed by Evert Dudok, who was chief executive of Astrium Services.
The space components business is now housed in the Electronics division, headed by Thomas Mueller.
Francois Auque, previously chief executive of all Astrium businesses, is heading the Space Systems business, which builds satellites.
Airbus managers have said the reorganization will remove 2,470 posts from the former Astrium business by the end of 2016 in an attempt to the increase profitability of a business that is not growing. Even without the reorganization inside Airbus, Astrium would have been forced to reduced staff to remain competitive, they said.
“We don’t make a lot of money in satellites,” one official said. “Nobody else does either. Our competitors make a few points of EBIT [pretax profit], but they’re certainly not at 10 percent.” Combining certain now-separate processes for making rockets and satellites is one avenue to be pursued, as is a hunt for synergies between rocket and satellite construction.
The Electronics division is expected to cut costs as well.
“Sensor fusion is a big opportunity for us,” one official said of the Electronics division. “One example: transmit/receive modules for radar systems are very similar, depending on how far up the production line you go. You’ve got Eurofighter radars, radars we make for the U.S. Navy, and radars for our TerraSAR Earth observation satellite design. All have common elements.”
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