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Category: Aircraft Manufacturing
Posted on 16 November 2020 30 December 2020
Each piece of news concerning the Airbus-Boeing tariffs conflict comes up as a new episode of a never-ending movie saga. As you probably know, in these films sometimes things are not usually as they seem to be at first glance. However, every now and then things are exactly what they seem to be. Can we expect the same plot twists in this tariff conflict between aircraft manufacturers? Let's try to answer this and other questions through this article.
Current context:
The most recent and last episode of this conflict, which could be titled "Airbus strikes back", happened a few days ago: the imposition of $4 billion in tariffs on United States goods by the European Union.
WTO (World Trade Organization) ruling issued last month entitled the EU to impose these tariffs based on the fact that Boeing had benefited unfairly from government support. People familiar with the matter stated that it had been an expected decision, but it is also true that it has been perceived for some sectors as an action only contributing to add more drawbacks in the path to finally get the conflict solved.
In the end, it is undeniable that this is a response in line with the first action taken by President Trump last year, who referred to the EU as a "foe" and complained about "what they do to us in trade" to finally impose tariffs on EU goods. Although this action was legitimately taken based on the WTO ruling issued last year, many stakeholders on both sides of the conflict would have chosen a negotiated settlement as a better approach.
Proof of the above mentioned was the disappointment expressed by the US-based airlines arguing that these measures put them into a difficult situation:
United Airlines, American Airlines, and Southwest Airlines (Boeing operators) were already struggling due to the mandatory grounding of the 737 MAX, and the stock market was not merciful with them after the tariffs announcement.
JetBlue and Delta (Airbus operators) stated that these tariffs would have an impact somehow on travelers due to the airline fleet strategy is not able to be changed overnight.
President Trump and Boeing's chief executive, Dennis A. Muilenburg, discussed a long-running trade dispute in 2017 at the company's plant in North Charleston. – Kevin Lamarque-Reuters.
On the other hand, and as expected, Boeing totally supported these measures as illustrates in the following statement:
"Europe is facing tariffs today because Airbus has refused for years to comply with WTO rulings." "Unfortunately, Airbus's noncompliance will negatively impact European member states, industries, and businesses completely unrelated to Airbus's actions, as well as Airbus's airline customers."
Boeing's written statement
In addition, before any tariff was imposed and right after WTO ruling, Airbus called for a settlement trying to avoid tariffs.
Guillaume Faury, Airbus Chief Executive Officer. – GettyImages.
"Tariffs would be a barrier against free trade and would have a negative impact on not only the US airlines but also US jobs, suppliers, and air travelers."
Guillaume Faury (Airbus CEO)
Even with the US tariffs imposition, there were some European leaders who had preferred a more conciliatory approach. Nevertheless, there was a clear motivation in the fact of imposing tariffs on US goods right after a new-elected US president arises (what is highly probable according to current predictions). This imposition results to be the most effective reminder of the fact that this conflict has to be addressed the sooner the better, and no matter who is in charge of US executive decisions.
Despite tariffs approval by the EU, it was clearly and intensely stated that this is not a matter of measures escalation:
From left to right Valdis Dombrovskis, EU's top trade official, and Peter Altmaier, German Economy Minister. – WTVB.
"We are not escalating anything. We are exercising our rights as awarded by the WTO. We are just here mirroring the US approach. Removing these tariffs would be a win-win for both sides."
Valdis Dombrovskis (EU's top trade official)
"We are ready to withdraw or suspend our tariffs at any time when the US is ready to do so on their side, whether it is the current or future US administration."
Peter Altmaier (German Economy Minister)
Worth to mention as well Donald Trump's last month statement in which threatened with a quick retaliation if the EU responded to US tariffs.
President Trump giving a speech in a Boeing's factory. – AERO Magazine.
"If they strike back, then we'll strike much harder than they'll strike."
Donald Trump (US President)
Additionally, there has been news in the last few days that will have an impact somehow on Airbus and Boeing's interests and decisions in the mid-term. They will hardly imply differences concerning the main strategies followed by each side to face a 16 years-long conflict, but they can lead to changes concerning the urgency or the character (more or less aggressive) of the actions to be taken. Some of them are listed below:
US election results: Trump sues as path to victory over Biden narrows
Pfizer and BioNTech Announce Vaccine Candidate Against COVID-19 Achieved Success in First Interim Analysis from Phase 3 Study
Airlines will struggle long after passengers feel safe to fly again
Airbus and Boeing Report September 2020 Commercial Aircraft Orders and Deliveries
Timeline and highlights:
The origin of this conflict dates back to October 2004 when the George W. Bush administration complained about the fact that Airbus was receiving subsidies from EU governments to design and develop large civil aircraft. These subsidies would have been covered up as loans whose interest rates were below market and being even forgiven.
US and Boeing also state that without this substantial financial support, Airbus would never have been able to become a serious competitor for Boeing. A380 was the aircraft under major scrutiny at the beginning, but further investigations were extended to the rest of the Airbus commercial family including even the A350 in a future stage.
Finally, the figures claimed by the US to WTO in 2006 were $22 billion (€19.4 billion) which US officials estimated that had resulted in a benefit of more than $200 billion.
World Trade Organization (WTO) headquarters in Geneva. – Reuters – Denis Balibouse.
In the meantime, the EU counteracted alleging that Boeing had received $23 billion in US subsidies. These subsidies in form of specific regulations, grants, tax breaks, tax deferrals, etc. would have impacted not only in large civil aircraft manufacturing but also in R&D (Research & Development) projects and contracts for the Department of Defence and NASA.
Airbus and EU claimed to WTO for these aids as its competitor did and in the same way, the investigations were extended to the design and development of a future Boeing aircraft: the 777X.
All the stated above was only the beginning of a trade conflict which has been estimated to reach up to $100 million in costs, and whose end will lead apparently to nobody's victory.
Find below a summary of the most relevant events of this conflict as a timeline:
2005: WTO initiates investigations of state support for Boeing and Airbus after failed bilateral negotiations.
2006: New Airbus A350 is announced and further government loans from EU are sought.
2009: WTO issues an interim ruling and states that some European aid provided to Airbus violated a ban on export subsidies.
2010: WTO demands to stop immediately the government loans for Airbus commercial aircraft including the A380. These loans are categorized as prohibited export subsidies. However, it rejects including the loans for the A350 as requested by US.
2011: A separate WTO panel partially supports the EU claims alleging $19 billion aid for Boeing from the US, ruling against it, and estimating its value in at least $5.3 billion.
2012: WTO restates the ruling against US support for Boeing. Both sides accuse each other of failing to comply with the WTO's rulings while stating its own compliance.
2013: New Boeing 777X is announced and agreed to be manufactured in Washington state shortly after an $8.7 billion tax break for the aerospace industry was stated by the local administration.
2014: EU launches a separate complaint against the 777X tax breaks.
2016: WTO states that EU failed to comply with its earlier rulings on Airbus. It also agrees to rule against aid for the new A350 but not putting it in the prohibited category. Tax breaks of the Boeing 777X are categorized as prohibited.
2017: After US appealing, the WTO reverses the ruling concerning 777X tax breaks giving clearance to US in maintaining support for Boeing. Further EU appeals in this regard are dismissed.
2018: WTO states again that EU failed to remove all subsidies to Airbus. US threatens with billions of dollars tariffs on EU goods. Arbitration comes into play to determine the scope of tariffs.
2019: WTO states US failed to remove subsidized tax breaks to Boeing in Washington state. Both sides disagree widely in public, accusing the other of refusing to negotiate any settlement. WTO arbitrators entitled US to impose tariffs on EU goods. US imposes tariffs on most Airbus aircraft and on other EU products. WTO also rejects EU claims that it no longer provides subsidies to Airbus, granting US to increase tariffs on a wider range of EU goods.
2020: US announces an increase in tariffs on Airbus aircraft imported from EU. Washington state votes to remove tax break that had benefited Boeing. Following delays due to the COVID19 crisis, WTO grants EU to impose tariffs on US goods. EU offers not to impose tariffs if US withdraws its existing tariffs on EU goods, but the US refuses arguing that EU has no legal basis to impose tariffs due to tax break were already removed.
In addition, and if you feel like to deep inside in more detail, you can take a look at the official disputes on the official WTO site:
DS316: European Communities and Certain Member States — Measures Affecting Trade in Large Civil Aircraft
DS317: United States — Measures Affecting Trade in Large Civil Aircraft
Tariffs imposed in a nutshell:
US tariffs on EU goods:
WTO in October 2019 granted the US to impose tariffs on $7.5 billion of annual EU goods. Therefore, right after the ruling US imposed 10% tariffs on Airbus aircraft made in Europe and 25% duties on several EU products. These products include French wine, Italian cheese, British cashmere, and Spanish olive oil among others.
live farmers protest in Madrid against low prices and demand government protection against US tariffs plans on EU agricultural produce. – AP Photo/Bernat Armangue.
EU claimed that it no longer subsidized Airbus but WTO rejected the appeal. It allowed then US to increase tariffs on a wider range of goods to press up for EU compliance. So from March 2020 US announced an increase in tariffs on EU aircraft from the initial 10% to 15%.
This scenario could even be worse for Airbus if, as Boeing expected, the tariffs also had impacted aircraft parts coming from Europe. These parts are needed to feed its factory opened in Mobile, Alabama in 2015. However, it seems that US administration declined to move that way due to local employment reasons.
EU tariffs on US goods:
In October 2020, WTO entitled EU to impose tariffs on $4 billion of US goods, so they did it this November 2020. These tariffs are 15% on Boeing aircraft and 25% on several goods including spirits, dried fruit, tobacco, frozen fish and shellfish, handbags and suitcases, motorcycle parts and tractors, video game consoles, cotton, and so on.
As stated before, EU offered a common tariff withdrawal offer which was dismissed by US.
It is clear that this conflict is having an impact and negative consequences not only on Airbus and Boeing as large commercial aircraft manufacturers.
Many small producers in EU and now in US are suffering because the export level of its products is drastically lowering due to tariffs. This is affecting directly their business bottom line making them even impossible to survive in some cases. The situation impacts also the end consumers who have to pay more for the same goods. All the above combined with the COVID19 crisis is unsettling the social and economic environment, which benefits nobody.
Stock markets registered strong rises after Biden seemed to be confirmed as elected President of the United States. This indicates that many socio-economic sectors have good expectations about Biden and it is undeniable that Donald Trump and Joe Biden are opposite from each other as night and day in several aspects. However, that is not the case concerning economic matters and with the huge impact of the COVID19 crisis in US, the shadow of protectionism is still present.
Joe Biden, in his first speech as president-elect, urges unity: 'Time to heal in America'. – Andrew Harnik – Reuters.
Do not forget that with the Obama administration the negotiations of a free-trade agreement with the EU never led to a deal, and Biden's approach to tariffs is not yet clear.
Moreover, Trump is not going to make things easy if he finally leaves the White House which is expected not to lead precisely to a smooth transition. If he finally remains as official President thanks to his army of lawyers, which seems increasingly improbable as time goes by, the hopes of solving the tariffs issue in a quick and clean way will be almost completely diluted.
Taking into account all these facts, with regards to US administration and its future actions concerning the tariffs issue, maybe the best approach is to lower or at least moderate the level of expectations. Actually, this seems to be the EU way of acting. "Hope the best and prepare for the worst" could be a good summary of the following statements made by the German Economy Minister Peter Altmaier, who led the discussions among the 27 EU nations which ended with the imposition of tariffs on US goods:
"Biden administration will contribute to world trade relations being more rules-based, being more multilateral, being less protectionist in the future."
Therefore, and even being the negotiated settlement the most probable, hopeful, and expected way of putting end to the conflict by many of the stakeholders the path to follow and the end of this conflict is far from being clear yet.
Worth mentioning that this is not the only tariffs issue involving US and EU, and affecting the Aerospace Industry. In March 2018, Trump administration imposed tariffs on steel (25%) and aluminum (10%) from most countries, extending them to EU as well. The negative effects of tariffs imposition were extended even to Boeing in this case, which saw how its raw materials needed to build aircraft were limited and become more expensive due to tariffs.
Americans who work for international auto companies demonstrate against trade tariffs they say will negatively impact US auto manufacturing. – AP Photo/J. Scott Applewhite.
It seems that this will be neither the only nor the last legal issue between Airbus and Boeing. Wingtips design conflict, or Sharklets vs. Winglets (both known by increasing the efficiency and avoid turbulences at the end of the wings), can be named as other of the most recent ones.
Hopefully not, but who knows if the agreements reached to help Boeing with the 737 MAX grounding issue, or the ones reached in US and EU to help both aircraft manufacturers against the COVID19 crisis could lead to future legal disputes.
I truly think that it is high time US/Boeing and Airbus/EU stop to consider the large aircraft manufacturing industry as a chess match between them. While they are fighting against each other, the China/COMAC team is getting stronger and consistently achieving milestones to become a serious medium-large commercial aircraft manufacturer.
Furthermore, the COVID19 crisis has reinforced China in its path to get the title of world's leading power, and the prospects of air traffic also position China as the area with most domestic flights and passengers in 2030. These facts should be enough to lead to a change of mindset and strategy of Boeing and Airbus. Maybe not today or tomorrow, but the trends are telling us that the status quo is going to change both: world and aerospace industry.
If you want to know more about COMAC the two following videos will give you a big picture:
China-made C919 successfully completed its first test flight.
The Rise Of Chinese Jets – ARJ21, C919, C929, C939 | COMAC's Answer To Boeing And Airbus!
Posted on 18 September 2019 27 November 2020
As though it was an Oscars ceremony, many people were keeping the eye about what company would be finally awarded such a relevant prize in Spain.
At this point in time, the French company Dassault Aviation, and the German branch of Airbus Defence & Space had been already designated to be the main coordinators of the project in their respective countries.
The final decision was eventually made public the Thursday, 4th September 2019, and the local media quickly broadcasted the piece of news.
"And the FCAS goes to … Indra"
Spanish Defence Ministry
The reactions were almost immediate. For some people, the decision was astonishing whereas for some others it was perceived as a bang on the table of the Spanish Government.
What is clear is the fact that the Spanish branch of Airbus, the former Airbus Military and Cassidian, was not going to be the main coordinator company of the project in Spain. This decision has broken a trend of more than twenty years of Airbus leadership of the aerospace military projects in Spain.
Defence Ministers of Spain (Margarita Robles), France (Florence Parly) and Germany (Ursula von der Leyen), during the signature of a letter of intent about Spain's integration in the French-German cooperation on the FCAS (14 February 2019). – Spanish Ministry of Defence.
Ministers of Spain
, France
and Germany
, after the signature of a Letter of Intentions about Spain's integration in the French-German cooperation on a Future Combat Air System #FCAS pic.twitter.com/3sbPxegLyY
— España en la OTAN
(@SpainNATO) February 14, 2019
Defence Ministers of Spain, France and Germany after the signature of a letter of intent about Spain's integration on the FCAS (14 February 2019). – Spanish Ministry of Defence.
Four months after the signing of a letter of intent about Spain's integration on the FCAS project, the formal announcement of the Spanish participation in the FCAS project finally took place in Le Bourget during the edition of the Paris Air Show the last 17 June 2019. This announcement was ratified by the French, German and Spanish Defence Ministers signature of the so-called Framework Arrangement for the development of FCAS.
Signature of the Framework Arrangement for the development of FCAS during Paris Air Show (17 June 2019). – Flynews.
The Spanish participation and its announcement came late and after the pressure and insistence of some social sectors. Sectors which strongly support the need for investing in the Spanish industry, and in this kind of multinational projects to get benefits in the medium and long term.
This practice of lagging behind rather than being proactive is something that seems to be usual in this sort of subjects for the Spanish Government, no matter the ruling party, an this is another example illustrating that. Actually, almost at the same time and in the same scenario, the German and French companies already selected to coordinate the Project in their respective countries, signed a joint industrial proposal which delivered to the nations.
Dassault chief executive Eric Trappier and the Airbus Defence & Space counterpart Dirk Hoke formalising the joint industrial proposal to deliver it to the nations. – Flynews.
Since then, everyone would have still to wait for two and a half months to finally know which company would take the coordinating role of the project in Spain. A decision which demonstrates that the Airbus extensive technical capabilities, its proven experience participating in multinational aerospace and defence programmes, and its excellent track record leading them in Spain have not been enough to tip the balance in its favour.
Time goes by since the decision announcement, and several hypothesis and theories are arising trying to explain the reasons behind the final decision of the Spanish Government. The most relevant and supported ones are addressed below:
National Champion of Defence
In the beginning, Indra was a state-owned compàny until 1999 when it was made a privately-held company. However, this movement was reversed in 2013 when the Government dependent organisation called SEPI (Sociedad de Participaciones Industriales; State Industrial Ownership Corporation) acquired the 20% of Indra participation.
Indra Headquarters in Madrid (Spain). – Indra.
This movement, perceived as a protection of the Spanish industrial interests due to the risk of acquisition of Indra by foreign companies, turned out to be permanent and eventually destined to pursue different goals.
Proof of that was the unsuccessful attempt of acquisition of ITP Aero by Indra during this year, company which currently belongs to the aircraft engine manufacturer Rolls Royce. ITP Aero is an originally Spanish company, well known for participating in the development and manufacturing of aircraft engines such as the EJ200 (Eurofighter Typhoon) or the TP400 (A400M).
ITP Aero Headquarters in Basque Country (Spain). – ITP Aero.
The acquisition would have been a big step ahead on balancing Indra internal capabilities dominated by IT, and in reinforcing its aerospace ones in order to be better positioned to address future aerospace projects as the FCAS. In addition, it would have led to set up a Spanish Champion of Defence.
Despite the above, FCAS coordination in Spain was achieved by Indra, and it can be considered another step on the way of setting up this Champion of Defence in Spain. Taking these facts into account, strategic movements aiming this goal seem to be very likely to happen in the near future. Even a second try of acquisition of ITP Aero may sound plausible.
Hidden Political interests
The fact that Indra is 20% participated by a Government dependent organisation, which supposes to be the major shareholder, has led some sectors to think about what particular interests could be also behind this decision.
The current chairman of Indra, Fernando Abril-Martorell, is supposed to be replaced in the medium term and the probable substitutes seem to come from the political sphere. Among them, the best positioned is Miguel Sebastián, former Spanish Minister for Industry, Tourism, and Trade during the period from 2008 to 2011 under José Luis Rodríguez Zapatero Government.
Miguel Sebastián who is currently an executive advisor in Indra representing SEPI interests. – El Mundo.
In addition, it is usual for Spanish politicians to have a second life linked to private-held companies after leaving the political sphere. Felipe González and Gas Natural, or José María Aznar and Endesa are only the two best-known examples. Although morally reprehensible, because their nominations seem to respond to a return for privileged treatment of the enterprise during their public life, this practice is not illegal in Spain. Will Indra be now open as a new destination for Spanish ex-politicians?
From left to right José Luis Rodríguez Zapatero, Miguel Sebastián, and Pedro Sánchez who is the current Prime Minister of Spain. – Energíapost.
A more questionable theory supports that the more than twenty years consecutively being the winning horse in Spain could have gone against Airbus own interests. According to this theory, the following ones are perceived as potential reasons which could have affected the final decision:
Maybe the strategy line followed was not 'strong' enough to guarantee its participation as the main coordinator in Spain, or
The effort invested in reinforcing the Airbus dominant position of the Aerospace Industry in Spain was too limited.
Focusing mainly on how the FCAS programme workload was going to be internally distributed rather than ensuring the Airbus participation at the highest level, is a statement that has room within this theory too.
What is sure is that after this decision, the lessons learnt are not going to be overlooked by Airbus.
Risk of investment and ROI relocation out of Spanish boundaries
This theory relies mainly on two elements: the comparison between the ownership structure of both companies, and the different strategies followed by them during recent times.
The participation of the Spanish Government in Airbus is around 4% through the SEPI, whereas the Indra's one reaches around 20% as stated before. It means that the Spanish Government is in the third position concerning Airbus ownership, pretty far from the 22% equally distributed between the German and French Governments.
Indra shareholding distribution. – Indra.
Airbus shareholding distribution. – Airbus.
Their ownership distribution is substantially reflected in the OBS (Organisational Breakdown Structure) of both Companies. Indra's board of directors is fully coped by Spanish people, whereas in Airbus there is no position in the decision front-line covered by any Spaniard (in the line behind decision front-line neither).
In fact, although Airbus Spanish ownership has been always the same, the Spanish influence in Airbus seems to have gone in detriment during the last decade. The present lack of Spanish executives contrasts with the situation in the past when one or even two executive positions were covered by Spaniards. Pilar Albiac Murillo as Executive Vicepresident HO Operations has been the most recent example.
The differences between the top of the organisational charts are the most visible ones. However, some people also support that this loss of Spanish influence goes downstream across the organisational chart even affecting programmes traditionally handled by Spanish managers.
This theory goes beyond, even stating that Spain is pushed into the background behind France, Germany or even other Airbus countries concerning the participation in the development of new core technologies. These technologies as for instance the AI, UAS, Cybersecurity, Cloud and so on are destined to become the cornerstone for the future of the Aerospace Industry.
One of the open debates across LinkedIn supporting this theory (text in Spanish).
Francisco Javier Cruz Hernandez.
Taking the exposed hypothesis as true ones it is not surprising that some analysts support that choosing Indra as Spain's FCAS coordinator is a sensible decision. If the final goal is to guarantee that Spanish FCAS investment and ROI (Return On Investment) will remain inside Spain and mainly handled by Spaniards during the programme life-cycle, the decision seems to have completely sense. The Spanish branch of Airbus Defence & Spain would have merely been perceived as unable to guarantee that.
In parallel to this theory, there are people who foresee a really bad outcome for the Spanish branch of Airbus Defence & Spain. They support that systematic poor financing of RDI (Research Development and Innovation) initiatives in Spain joint to the low number of orders that Spain places in each programme developed by the Company, pretty far from the German and French ones, logically lead to this loss of influence in Airbus.
In the worst-case scenario, the decision about the FCAS could undermine the Spanish influence in Airbus even more. The consequence would be an unpredictable 'stall' (speaking in aerospace language) of the Spanish Airbus branch interests in particular, and of the Spanish Aerospace Industry in general.
Above statements may sound quite catastrophic but as the famous quote says: "Hope for the best, but prepare for the worst".
FCAS programme in a nutshell
FCAS (Future Combat Air System) is Europe's most strategic defence programme in the 21st century. Defined as a combat system of systems, the cornerstone of FCAS is the Next-Generation Weapon System (NGWS) where next-generation fighters team up with manned and unmanned platforms and with remote carriers as force multipliers.
Based on leveraging the collective and connected capabilities of pooled platforms, FCAS and its air combat cloud will provide full interoperability with allied forces across domains from land to cyber.
FCAS – Future Combat Air System infographic. – Airbus
Promotional video of the Future Combat Air System – FCAS, manned and unmanned European system by Airbus & Dassault published during the 2018 ILA Berlin Air Show.
Unreleased images and all about the A400M accident
Three years and four months time has passed since the A400M accident, one of the events which for sure is recalled by any aviation enthusiast. Even more by the Spanish ones or by those related to Airbus, the European aircraft manufacturing company. And not precisely because of being something good and worth remembering, quite the opposite.
The events
9th May 2015 at Seville – San Pablo Airport (Spain), It is Saturday 12:05 AM and the A400M named MSN023 (Manufacturer's Serial Number) was about to take off for the first time to perform some in-flight tests. Nobody could predict what was going to happen next.
Airbus A400M, a similar model to the MSN023 involved in the accident. / Airbus
Just after around three minutes on air, an unexpected failure left three out of the four engines powerless and without recovery capacity. In light of this dramatic situation, the only option was to perform an emergency landing so the aircrew reported the emergency and ask for returning to the airport straight away.
Thanks to the recently released images published by Europapress, and the first-person testimony of the photographer, Manuel Vilela, more details about the last stages before the final impact have been revealed.
Once declared the emergency, a too abrupt roll to the left in order to return to the departure airport unstabilised the aircraft. Right after, and being the aircraft falling uncontrollably down, the return to the airport turned out impossible at that time.
The Airbus A400M MSN023 rolling to the left trying to go back to the departure airport. / Manuel Vilela (Europapress)
Avoiding the industrial and commercial facilities around the airport, the only available landing area nearby was some farming fields in which Manuel Vilela was taking photographs that morning. The maneuver was proved impossible due to the aircraft imbalance and the lost of engines thrust. In addition to that, the surrounding airspace was crossed by uncountable overhead power lines, making even more lethal the aircraft path.
When collided to the ground, the aircraft was rolled around 30 degrees to the left. The first impacting part was the left wing bursting into a fireball, followed by a second fireball when the right wing hit the ground. Simultaneously, the cabin broke in two halves spitting out all the items inside.
The Airbus A400M MSN023 about to collide to the ground. / Manuel Vilela (Europapress)
Next, and while the damaged aircraft expelled rests of its structure and pieces of equipment, the T-shaped tail hit one of the above-mentioned overhead power lines provoking the third big explosion. In a matter of seconds and with no chance to react, all was in flames, one of the power lines' pylons knocked down, and several explosions of lower intensity kept happening.
The Airbus A400M MSN023 at the time of the collision. / Manuel Vilela (Europapress)
Manuel Vilela, the photographer and first-person witness of the accident, called Emergencies who after a few minutes get there and began to assist the crew members. Moreover, and exercising a strong sense of responsibility, Manuel Vilela proceeded to deliver all his photography material straight away to the competent judicial authority for helping in the further investigations.
The column of smoke and fire after the Airbus A400M MSN023 collision. / Manuel Vilela (Europapress)
The fatal outcome of this terrible event were four casualties out of six crew members: Captain, Jaime de Gandarillas; First Officer, Manuel Regueiro; and Engineers, Gabriel García Prieto and Jesualdo Martínez. The other crew members; José Luis de Augusto Gil, and Joaquín Muñoz de Anaya; resulted badly injured and still suffering the effects of the accident.
The Airbus A400M MSN023 set on fire after the accident. / Manuel Vilela (Europapress)
Investigation findings
The Commission for the Technical Investigation of Military Aircraft Accidents (CITAAM), dependent on the Spanish Defence Ministry, was the entity in charge of the experts' technical report elaboration about the A400M accident.
The main conclusion of this report was that the accident was eventually caused by a software failure: the incorrect loading of this software on the engines' Electric Control Units (ECU) erased some critical parameters for the engines to operate correctly in flight. This issue kept unnoticed till was triggered in mid-flight.
MSN023 was the second A400M flying with the new engines' software developed by Europrop International (EPI ), which was responsible for loading the software into the Electric Control Units (ECU) of the engines, even if there was an update to be made in the Airbus factory. However, with a new software release, the loads began to be made by Airbus, which understood that the software could be used 'freely' and 'within the use limitations established by the manufacturer', a position that was not shared by EPI.
The Airbus A400M MSN023 set on fire after the accident (another angle). / Manuel Vilela (Europapress)
In this particular case the engines arrived the factory with an old software release but, before the delivery, a new release obtained the certification. Airbus wanted to update it before the delivery to the Turkish Air Force, but in the 'absence of an agreed procedure' for loading the software, EPI informed Airbus that it could not sign this 'supplementary' certification. As a result, EPI staff went to the factory in February 2015 to load the new software release in several aircraft, one of them the MSN023.
Above procedure was registered in the engine logbook, being stored by EPI, but not in a yellow card which includes, among other data, the engine ECU version. The report states that there is no record of yellow cards delivered by Airbus to EPI for updating. This fact caused that Airbus checked the engine software to load the new release just a month after EPI successful loading.
The Airbus A400M MSN023 cockpit in flames after the accident. / Manuel Vilela (Europapress)
During the Airbus check, the new software release was not detected proceeding then to load it into the ECU. Furthermore, the aircraft electrical configuration for the loading process was not correctly collected in the work order, leading to a wrong energizing of the ECU and some loading errors.
The software loading was eventually performed, but by then the torques calibration parameters of one of the channels had been already erased. Despite the loading errors, those were not collected in a nonconformity sheet or officially reported and, besides, the torques calibration parameters were not verified after the software loading. Both actions should have been performed as stated procedures.
The Airbus A400M MSN023 fuselage parts after the accident. / Manuel Vilela (Europapress)
At this point, the operational logic of the ECU allowed a normal engine on-ground operation, nevertheless, and due to the lack of parameters in one of the channels, the system did not know how to act in-flight leaving the engines in idle. This failure, included in the document called 'problem report', was considered far remote enough to happen that was accepted to be corrected in the next software release.
One of the ECU was changed by another one before the flight, which already had the software well updated, and that was the reason for the only engine working as expected.
In conclusion, the report states the lack of coordination between EPI and Airbus regarding the software uploading and update processes, and that Airbus did not agree with EPI its software charging procedure.
The Airbus A400M MSN023 fuselage parts after the accident (another angle). / Manuel Vilela (Europapress)
Operational analysis
The main conclusion in this sense was that the crew took reasonable decisions in the light of the arising issues suffered in-flight, even though they were not the most adequate.
Despite the errors in the crew performance, they acted in a logical way according to the warnings and alerts received, the operational limitations imposed by the control tower, and the lack of training of the crew concerning the arisen emergencies.
The three engines failure at the same time is so unlikely, and with such critical effects, that it was really difficult to process all the information available in the cockpit to take the appropriate decisions in such a short period of time.
Rests of the Airbus A400M MSN023 after the accident. / Manuel Vilela (Europapress)
Court process
The accident and its consequences were investigated by the court of instruction number 13 of Seville. The last step took place the last 3rd April 2018 and it was the stay (dismissal without prejudice) of the case ordered by the head of the court María José Moreno. Considering that there were no indications to continue the criminal prosecution and after the Prosecutor's Office request.
Likewise, the request for additional investigation presented by the private prosecutions, including the ones of the crew members' families, was rejected.
Rests of the Airbus A400M MSN023 after the accident (another angle). / Manuel Vilela (Europapress)
The court pointed out that the accident was caused by a 'concatenated set of events', but none of them with 'enough' entity to attribute criminal liabilities. However, it was also stated that "multiple failures" were made by Airbus and Europe International (EPI).
This decision was appealed by the majority of the prosecutions to revoke it and to keep open the procedures, requesting as well the opening of new ones 'needed' for 'the total clarification' of the facts. This appeal was dismissed by the court, but at this time this order for dismissal has been appealed too at the Provincial Court of Seville. It will have to decide among the definitive dismissal of the proceedings or to continue with them and the opening of the new ones requested by the prosecutions.
The accident investigation reveals some things that sound self-evident, but worth to recall from time to time: define and follow rigorously stated procedures when developing engineering works is a must, as well as register and report whichever arising issue during their performance. No matter how relevant or important they seem to be because the incidents and accidents are mainly caused by the addition of minor issues or mistakes.
The only positive side of such dramatic events is that their investigations allow reducing the risks and the probability of happening again.
Some videos related to the Airbus A400M accident can be found below and following this link to the original article published in exclusive by Europapress (audio in Spanish).
Posted on 24 July 2018 28 November 2020
Beluga XL: facts and figures of a 'worthwhale' project
Right now everybody is talking about the Beluga XL, the newest and most distinctive member of the Airbus family, and its maiden flight which took place last 19 July. Its unmistakable humpbacked silhouette riding the heaven continues to delight not only to aviation enthusiasts, but also to anyone who enjoys breathtaking scenes and impressive footages.
This exceptional programme milestone was witnessed by Airbus employees, programme partners, the media and the rest of the more than 10,000 participants gathered at Toulouse-Blagnac airport near the company's headquarters.
At 10:30 AM local time as scheduled, the aircraft was taking off from Toulouse –Blagnac airport, and after four hours and eleven minutes in the skies flying over southern France, it made its first final approach at the same point.
Beluga XL first flight route on flightradar24.
Right after performing taxi-in, the first Beluga XL aircrew emerged from behind the cargo door and was received by the cheering audience, among whom were the head of the Beluga XL programme Bertrand George; the Airbus Commercial Aircraft President, Guillaume Faury; and the head of programmes Didier Evrard.
"Today you brought us a dream, but there's even one thing we have that you don't: we saw this beautiful aircraft in flight! Today marks a major step towards achieving our industrial goals."– Guillaume Faury, Airbus Commercial Aircraft President, to the first Beluga XL aircrew.
Beluga XL First Flight aircrew received at Toulouse-Blagnac airport.
This is a summary of one of the most remarkable events took place coinciding with the Day 4 of Farnborough Airshow 2018. But of course, there are serious business purposes supporting such an outstanding programme. What are its main features, and the goals behind the scenes of this amazing first flight? Let's go deep into them:
Main drivers for Beluga XL
Unlike many people could think, air transport is the most effective logistic option to guarantee the Airbus just-in-time production system. Based on customer commitments, the volume of parts and components ferried between Airbus sites has reached record levels, and the Beluga ST flight hours have increased by over a third since November 2014 when Beluga XL programme started.
European Airbus Sites map.
Forecasted A350 XWB and single-aisle ramp up figures were crystal clear, showing an upcoming production critical phase. Next decade commitments would have been unreachable by the current Beluga ST fleet, so that the Beluga XL becomes the key enabler as the step further needed to keep on meeting customer expectations.
Programme next steps
Beluga XL Flight Test Team patch.
After a development phase of 44 months, the Beluga XL has reached its maiden flight on time, cost and quality by using a plateau approach. During this stage, a single roof was shared by the whole team and suppliers, which allowed to ease communication and ensure cross-collaboration.
The first flight has been only the starting point of a certification campaign which will involve two aircraft for ten months and comprise 750 flight hours. The first aircraft underwent more than 72 development and certification ground tests before lifting off.
The entry into service is scheduled in 2019 following certification, being the complete fleet composed of five aircraft. The second aircraft will enter into service after its own maiden flight in spring 2019, followed by the third one later that year. The fourth and fifth ones will arrive yearly, and before the complete retirement of Beluga ST fleet.
The A330-700L, known as Beluga XL, will be certified as a derivative of the A330-200 freighter. Nothing new as its predecessor the A300-600 ST, known as Beluga ST, was a derivative of the A300, and other Airbus products as for instance the well-known A330 MRTT (Multi Role Tanker Transport) are derivatives as well.
Airbus Transport International (ATI), an Airbus subsidiary created in 1996, that currently operates the fleet of five A300-600 ST Beluga cargo aircraft, will operate the Beluga XL fleet as well.
Beluga XL enhancements compared to its predecessor
When comparing the Beluga XL to the Beluga ST, their similarities are clearly visible: a cockpit placed below fuselage to maximize the available loading area, the bubbled shaped cargo hold to keep its aerodynamic profile, the two vertical fins added to the extended Horizontal Tail Plane (HTP) to guarantee the aircraft stability, and so on.
Beluga ST and Beluga XL face to face at Toulouse-Blagnac airport.
However, their differences are noticeable enough to make the Beluga XL a far better option for Airbus to keep facing its air transport logistics. Compared to its predecessor, it has a 1m wider cross-section, a 6m longer cargo deck, and a 0.4m increment in payload max height. Bringing altogether an increase in transport capacity of 30%.
The Beluga XL enlarged cargo hold can accommodate a complete set of A350 XWB wings, rather than the mid-set that the Beluga ST is able, speeding up their transport from Broughton to the programme's final assembly line in Toulouse. It can also carry the A350 XWB's largest fuselage section with room to spare. These facts are key in order to meet ramp up needs beyond current planned levels.
Beluga XL Infographic.
Concerning operational capabilities, the Range and Payload have been increased as well as the Maximum Take-off Weight (MTOW), whereas the turnaround time has been almost halved. As consequence, the power plants have been updated from the General Electric original ones to the brand new Rolls Royce Trent 700R to provide with more thrust. Each aircraft is expected to perform between 900 and 1,000 flights per year, which corresponds to approximately 1,700 hours in the air.
Livery:
Its smiling and striking livery compared to its predecessors' one, was chosen among six different options proposed by Airbus branding team to its employees in an election campaign that attracted almost 21,000 participants. This idea was supported by the stakeholders as a way to engage Airbus teams and to develop Airbus' identity.
"The six designs we proposed respect our brand identity while running from the conventional to the unconventional, even adding a touch of fun. After a detailed analysis we added a large XL and developed the final livery. We just hope everyone likes it!" – Tim Orr, Head of Airbus Branding.
Beluga XL: the perfect reflection of the state of the art in aircraft manufacturing.
Electroluminescent (ELM) paint technology to further highlight the final livery's definition was considered as well, but with roll-out expected during the first quarter of 2018, the planning constraints were eventually imposed.
Electroluminescent painting technology on Airbus A350-1000.
Other uses:
The Beluga ST fleet has been used for carrying other payloads apart from Airbus aircraft sections. These payloads were from launch vehicles parts or International Space Station components to military materials to forward operating bases or recovered material for maintenance and repair. These could be interesting options to give the Beluga ST fleet a second life after its full retirement from Airbus operations.
Exclusiveness:
They are not the only ones of their kind. Highly demanding logistic needs are not exclusive of Airbus, and there are other companies and organizations which use air transport solutions to manage them too. Some relevant examples of them are Boeing and its Dreamlifter, NASA and its Aero Spacelines Super Guppy, and the former USSR and its 6 engined Antonov 225.
Boeing Dreamlifter.
NASA Aero Spacelines Super Guppy.
Former USSR Antonov 225.
For some people, the Beluga remains only as an awkwardly shaped aircraft, whereas for others it is the cutest flying beauty they have ever seen. What is not a matter of opinion is the innovative and outstanding product it is. Hopefully, many other remarkable industry developments like this one will be witnessed in the following years.
Beluga XL First Flight take-off aerial view.
Spot the differences between partnerships: Airbus-Bombardier vs. Boeing-Embraer
It is undeniable that the aircraft manufacturing industry is going through one of the most turbulent periods in its history. Difficult to predict what is going to be the next astonishing revelation, emotions go up and down like in a roller-coaster ride.
The deal announcement between Bombardier and Delta Air Lines, for the purchase of 75 CS100 jets in April 2016, can be considered the starting point of all the relevant events leading to the current situation. Some time afterwards, and trying to counteract the upcoming threat of new aircraft selling competitors within U.S. borders, Boeing complained about the deal price. It claimed that it had been lowered below real market one due to the unfair subsidies Bombardier received from Canadian Government.
Delta's Bombardier CS100. / Delta
A year and a half after the deal announcement Boeing complaints were supported by Trump's administration and by the U.S. Commerce Department, which finally imposed an outrageous 220% increment in customs duties to Bombardier in order to sell CSeries within U.S. borders.
This ruling put Bombardier in a very tough situation pushing it into Airbus arms in a desperate measure to avoid the bankruptcy of its CSeries programme and the consequent impact in the whole company. The partnership between Airbus and Bombardier announced on the 16th of October last year was truly a backfire for Boeing, whose actions eventually strengthened its main competitor.
Airbus A320 meets the new family member A220. / Airbus
The next relevant chapter of this story came from the U.S. International Trade Commission (USITC), a politically balanced independent body which investigates the effects of dumping and subsidised imports on U.S. industry. It ruled unanimously on 26 January to overturn last year U.S. Commerce Department decision. This was rightly foreseen by Delta Air Lines stating that the Commerce Department's decision was preliminary being the USITC's determination the 'real decision.'
"We are confident the USITC will conclude that no U.S. manufacturer is at risk because neither Boeing nor any other U.S. manufacturer makes any 100-110 seat aircraft that competes with the CS100." – Delta public statement
These setbacks forced Boeing to explore other options such as opening negotiations with Embraer, which finally led to a joint venture recently announced on beginning July this year.
Above mentioned facts are history, but what are the similarities and differences between each partnership apart from their origins? What can we expect will be the next steps of each one in the future?
Airbus Bombardier Boeing EmbraerBoeing and Embraer logos. / Boeing and Embraer
Type of partnership
Both partnerships have been conceived as joint ventures, neither merges nor acquisitions nor any other formula. It means each participant provides with resources to accomplish a common goal, keeping its identities and the rest of business lines and objectives independent.
Embraer's airliner business will be the target of the partnership, whereas its defense and business jet operations will keep aside. Same as Bombardier's one, whose CSeries programme will be the only business unit involved in the partnership.
The strategy behind both partnerships seems to be pretty similar: the big ones Boeing and Airbus will provide with their business support expertise (sales, marketing, procurement, customer services, and so on), whereas Bombardier and Embraer will contribute with their technical expertise in small airliners manufacturing.
A similar business strategy does not mean necessarily similar ownership structure, and that is the case if both partnerships are compared:
CSeries Aircraft Limited Partnership (CSALP) is participated by Airbus in a 50.01% whereas Bombardier and Investissement Québec (IQ) own approximately 31% and 19% respectively. On the other hand, Boeing is planned to own the 80% stake in its partnership with Embraer which will hold the remaining 20%.
Decision making is directly related to the ownership structure, and it is clear that the balance is in favour of the big ones in both partnerships, but in a different way:
CSALP will remain independent and led by seven directors composing the Board: four proposed by Airbus, two by Bombardier, and one by IQ, being Airbus entitled as well to name the Chairman. However, Boeing-Embraer partnership is going to be led by a Brazilian management team, President and Chief Executive Officer, having Boeing full management and operational control of it.
Embraer 190 with the Brazilian flag in the background. / Embraer
Financial facts
The financial aspect could be defined as the more distant feature between both partnerships. The differences are considerable, which might even set different long-term strategies depending on the facing context:
CSALP partnership was agreed at no cost to Airbus which paid a token fee of one Canadian dollar for the majority stake. Nevertheless, Boeing will pay USD$3.8 billion of the total Embraer's commercial aircraft operations valued at USD$4.5 billion. Besides, Embraer executives assure that much of its debt will be transferred to the new partnership and Boeing will contribute with a capital injection.
In contrast, CSALP will not assume any financial debt and there will be no cash contribution by any of the partners except Bombardier, continuing with its current funding plan and facing if required the cash shortfalls up to a certain amount.
Social perception
Although more subjective, this is one of the issues that can be a thruster or an anchor for the future of the partnerships. As in any big change, there is always resistance or even aversion to the change coming from some stakeholders involved.
CSeries partnership seems to have been received more willingly due to the context involving Boeing complaints and risk of unbearable custom duties. And although no job losses were assured since the beginning, some uncertainty still remains in the atmosphere and there is a lot of work to be done. This is a long-distance race and it is better not to be blinded by enthusiasm.
Slightly different were the feelings awaken, at least for the time being, by the Boeing-Embraer partnership: Boeing first intentions of acquiring Embraer as a whole were dismissed categorically by Brazilian government due to the strategic value of the Embraer's defence arm. This movement, perceived as an aggression for some stakeholders, led them to support the veto of any related operation. Moreover, the feeling of price lowering of Embraer's commercial aircraft unit compared to previous reports gives Embraer shareholders strong odds to demand a higher price for the stake.
Despite everything mentioned, recent signals suggest the Brazilian government is satisfied with the deal conditions, as long as the Brazilian jobs and the development of new technologies by Embraer are guaranteed.
Airbus A220-300 after its first landing at Toulouse Airport. / Airbus
Present and future steps
Some actions have been already performed by CSALP as it has the longest lifetime. The most remarkable are:
The decision of opening an additional CSeries FAL (Final Assembly Line) at Mobile Airbus site (Alabama, U.S.) to supply U.S. customers, keeping the primary FAL in Mirabel (Quebec, Canada).
The rebranding of the CSeries aircraft to A220-100 and A220-300.
The last one seems suitable to be followed by the Boeing-Embraer partnership according to its ownership structure similarities with CSALP, whereas a new FAL opening seems quite improbable in an early stage.
Embraer KC-390 military transport aircraft. / Embraer
It is true that Boeing-Embraer passenger jet partnership has not been formally established yet, but some people familiar with the matter bet for an additional partnership in sales and services for the KC-390 military cargo jet. Despite being a separate partnership, it will strengthen the relationship.
One of the main expectations of both partnerships is a quicker and better expansion worldwide, being their products positioned to target the estimated 6,000 aircraft needed in the market segment at issue over the next 20 years. Additionally, and thanks to the partnerships agreed, the situation of duopoly in aircraft manufacturing industry seems to be maintained at least in the following years making difficult the entrance of new prospective competitors.
It seems nearly impossible to foresee what will be the amazing announcements unveiled in the future concerning this race between aircraft manufacturers. What seems more certain is that upcoming surprises are guaranteed, so keep on watching, hearing and reading news and publications like this one if you want to be up to date.
Posted on 29 June 2018 28 November 2020
Where will Airbus UK assets winds up in case of Hard Brexit?
At this time everyone familiar with the matter is aware of the Airbus COO Tom Williams interview in BBC 4 about Brexit and its consequences for Airbus UK held the past 21 June 2018. The ideas exposed during the interview were reinforced by the Brexit Risk Assessment Memorandum published by Airbus summarising the possible scenarios ahead, their impacts, and a series of measures to counteract possible damages for the Company or any of its interests.
Interview extract to Airbus COO Tom Williams in BBC about Brexit and its consequences. / BBC (click on the Image to hear the Interview extract)
Airbus has taken a clear position since the beginning in this regard: asking for support to the UK Government to cope with this exceptional situation, and being fully transparent about its concerns and the main issues at stake. Now the cards are on the table and, although there is still room for maneuver, by the end of March 2019 the Brexit will become real and all the desired agreements to minimize the impact in Airbus have to be clearly set at that time.
Airbus Oxford Economics Infographic. / OXFORD ECONOMICS (click on the Image to know more about the impact of Airbus on the UK economy)
Unfortunately, time in politics has no the same pace as in business, so we have to ask ourselves: What if these agreements are not set in time or simply not reached? What if Hard Brexit impacts in Airbus UK with no cushion? Well, the Memorandum is crystal clear in this regard:
No more investment in UK: future or even committed at present.
No new future projects: even relocating current ones, and as a consequence
Workload and workforce relocation or even reduction in ultimate extent.
There are many prospective Airbus countries more than willing to welcome these investments and projects to revitalize their economy and aerospace industry. But, what are the best positioned in this regard?
One of the pillars of Airbus UK is the space technologies linked to navigation, communications, observation, general equipment and so on. It is hard to say beforehand which countries are the best positioned in this regard, but Germany or France seem to be the best options apart from the UK itself to embrace space investments and projects due to their experience and current activities.
The other main pillar of Airbus UK activities, and probably the best known, is the wing manufacturing for the Airbus aircraft models. In this case the options are widely more open: Spain, China and even the US arise as possible options to be taken into account.
France and Germany remain as remarkable options in this regard due to they are the countries which have more weight concerning shareholding and top management presence. In addition, they both have FAL (Final Assembly Lines) within its borders and this is a great advantage from the logistics point of view.
China's attractiveness is supported by unbeatable wage costs combined with the best aviation market forecast for the next decades. Furthermore, the huge interest it has in developing its aerospace industry can come together as well to lead to a win-win situation difficult to beat.
Spain, not at the same level of China's wage costs, remains still attractive in the EU region and compared to France or Germany. Besides, it has proven experience in manufacturing Horizontal Tail Planes (HTP) for the Airbus aircraft models which for sure, have similarities, commonalities and manufacturing synergies with wings. And last but not least, Spain is a worldwide benchmark in composites manufacturing which is the present and the future of aircraft manufacturing in general and wing manufacturing in particular.
The US remains as an option to be assessed if the Company bets for increasing its presence there, maybe taking any advantage of its recent acquisition of Bombardier commercial aircraft arm and its plans to enlarge the Alabama site.
A320 work sharing between Airbus core countries. / Airbus
In my humble opinion there is not a single correct answer and probably, if the case arises, a mixture of the options exposed above and other ones will take place.
It's a fact that UK based companies' strategy will be affected by Brexit. Now the issue is to determine how and to what extent they are going to be impacted.
Finally, I would like to wish the best to my UK colleagues who are passing through a difficult and disheartening situation. And to encourage the UK leaders to face reality, assume their responsibilities, and take decisions to avoid the suffering and damages to their citizens.


← Finish date and the problem in MS PROJECT 2010! Or not?
Effort driven Task, and fixed work! How they fits together?
I got confused in this topic.
OK. What does Effort Driven mean? It means MORE HAND LESS WORK!
And I will assign John to the Task!
and you can see, that Duration is changed, according to the formula: DURATION * UNITS = WORK, e.g. Duration * Units 50% (4 hours per day) = 24 hours Fixed work –> Duration = 24/4 = 6 days!
Work, and Units are unchanged, and that SEEMS LIKE A BUG, BUT IT IS NOT! Read my next post for that!
When you Fixe work Task, it is always Effort driven!
As you can see, I still need 24 hours of Work for the Task, but since I have Mary on board, both John and Mary will spent less hours on this Task. And that is what effort driven means. And you can see effects of Effort Driven Task when you add or remove a resource/resources to/from Tasks.
I hope that my blog reader will find this Post useful!
6 Responses to Effort driven Task, and fixed work! How they fits together?
Is there any need to change mode in Tools->option->schedule-> for new task are effort driven?
Yes if you are working on Project which tasks are mostly effort driven!
Please assist. When I insert a subproject (Title: Primary Heat Exchanger) into my Master Schedule, it inserts the project but doesn't give it the same saved name in the Master Schedule. Why does this happen?
What do you mean by "title"? You save your project with the name: "Primary Heat Exchanger.mpp"?
I really appreciate the effort performed in your highly informative posts, however, what about creating a Facebook page lively updating with your newest topics ?
I think this is much easier for your fans to follow your newly released topics.


text:
Commentary: Razer chose to list in Hong Kong. Has Singapore lost its competitiveness?
Commentary Business
A few high-profile companies have chosen to list in Hong Kong rather than Singapore. One NUS Business School observer discusses if there's cause for concern and what Singapore can do to shore up its competitiveness.
By Lawrence Loh
15 May 2018 06:27AM (Updated: 04 Sep 2018 10:01AM )
SINGAPORE: When Singapore company Razer chose to list in Hong Kong in 2017, the news made regional headlines.
Razer's listing followed not long after home-grown OSIM International had delisted from the Singapore Exchange and attempted to list on the Hong Kong Stock Exchange as V3 Group.
Whenever high-profile companies and organisations move out of Singapore as their places of business and choose a competing location, it is natural for many to wonder whether the city-state has lost its aura.
Indeed, has the country lost its competitiveness?
Many can still recall the spectacular merger a year earlier by Maersk Line, the world's largest container shipping company, of its Hong Kong and Singapore offices. Maersk had then picked the former as its headquarters.
Just this year, the University of Chicago's Booth School of Business completed its move from Singapore to Hong Kong with a new Asia campus to house its flagship executive MBA programme, which had run in Singapore for more than 15 years.
SINGAPORE CONTINUES TO DO WELL IN GLOBAL RANKINGS
By any yardstick, Singapore continues to do well in major global rankings.
In the Global Competitiveness Report 2017-2018 compiled by the renowned World Economic Forum, Singapore was ranked third in the world after Switzerland and United States but attained a top place in Asia. In another study by the IMD World Competitiveness Centre, Singapore was ranked third globally.
Singapore has overtaken the US to take first spot in the 2019 Global Competitiveness Report compiled by the renowned World Economic Forum (File photo: AFP/Roslan Rahman)
In more specialised studies, however, Singapore appears well ahead in the region. It was ranked top in the Asia-Pacific for the fifth straight year in the Global Talent Competitiveness Index released by INSEAD this April. Securing the second spot after Switzerland, it was the only Asia-Pacific country placed in the global top ten.
Singapore was also number one in the world in the Global Smart City Performance Index done by Juniper Research released in March, ahead of next-ranked London and New York.
READ: A commentary on the case for optimism on Singapore's economic growth figures.
FAIR SHARE OF BIG NAMES
Singapore still attracts and retains its fair line-up of regional headquarters of big companies like Apple, Bayer, Bridgestone, Chevron, Google, Hewlett Packard, Sony, Proctor & Gamble, and Unilever. Just last week, global healthcare giant Johnson & Johnson opened its Asia-Pacific headquarters in Singapore.
But the worry is naturally the perception that initial public offerings or IPOs are on the decline. These are new listings on a stock exchange that seek new financial capital through shares.
Looking at the bigger picture beyond Razer, the number of new listings has not declined in Singapore – this was 24 in 2017 compared to just 19 a year earlier. But there were comparatively more delistings of 27 in 2017 although this was a slight decline from the 30 in 2016.
The Johnson and Johnson logo is seen at an office building in Singapore January 17, 2018. (Photo: REUTERS/Thomas White)
However, these numbers pale in comparison with those in Hong Kong, which saw 174 new listings in 2017 and 126 in 2016, several fold larger than Singapore's.
The race for new, big listings will remain intense. The famous Alibaba is an oft-quoted US$25 billion (S$33 billion) IPO that skipped Asia to list on the New York Stock Exchange. This enabled its unique governance arrangement to continue, whereby directors are appointed by a select group of top executives and investors, a feature prohibited even in Hong Kong.
Alibaba is reportedly considering double listing now in Hong Kong where the stock exchange has been set to amend rules on "dual-class shares" so as to allow the company to list there too.
Singapore likewise is on track to permit such listings through a liberalisation of its regulations which may well attract the next wave of Alibabas. The public consultation on the admission criteria and safeguards has just ended last month and implementation in the second half of this year looks likely.
New regional IPOs may drive the impetus to further liberalise Singapore's financial markets. Xiaomi the Chinese smartphone maker has just filed for an IPO in Hong Kong. Expected to raise more than US$10 billion, it will be the world's biggest IPO since Alibaba.
Xiaomi's Vice President Hugo Barra looks on in front of the company's logo during a group interview after the launching ceremony of Redmi Note 3 in Hong Kong, China March 21, 2016. (Photo: REUTERS/Bobby Yip)
When OSIM relocated to Hong Kong, its founder Ron Sim lamented that its stock has not been fairly valued due to the lack of financial depth and liquidity in the Singapore exchange.
This is true if we look at the statistics. As at end-2017, the domestic market capitalisation for Singapore and Hong Kong were US$787 billion and US$4.35 trillion respectively – Hong Kong's total share value is 5.5 times larger than that of Singapore.
More revealing is the average daily turnover value of shares – Hong Kong commanded US$7.96 billion as at end-2017 which is 9.4 times that of Singapore's US$850 million.
PROXIMITY TO CONSUMER MARKETS A KEY CONSIDERATION
Beyond finances, proximity to large consumer markets is becoming a key consideration for IPOs. After being on the Singapore bourse for 16 years, OSIM decided on the move as it had 172 stores in mainland China and 35 in Hong Kong compared to only 26 in Singapore.
Likewise, Alibaba's pre-dominant market is China. This may be a key factor in its consideration to also list in Hong Kong - to tap financiers who are familiar or involved with domestic markets and are thus more amenable to invest in its shares.
Singapore may lose out due to its distance to the big Chinese market and its large available pots of investor funding compared to Hong Kong or to even rising bourses like Shanghai and Shenzhen. This being so, it should reconstruct its unique selling point and redefine its relevance.
As at end-2017, the domestic market capitalisation for Hong Kong was US$4.35 trillion which total share value is 5.5 times larger than that of Singapore. (Photo: AFP/PHILIPPE LOPEZ)
First, Singapore has the clear advantage of being an access point to the ASEAN market. Singapore needs to play this ASEAN trump suit.
Southeast Asia has a sizeable population of some 650 million, and a youthful one with a median age of 29 – compared to China's median age of 37 even with its population of 1.4 billion.
ASEAN is also the world's third largest market after China and India, and surpasses market blocs like the European Union.
Second, it is good that Singapore is strengthening its involvement in the Belt and Road Initiative (BRI), a huge market. Its coverage traverses across an inland Silk Road Economic Belt with multiple inter-country corridors as well as a Maritime Silk Road with several sea routes beyond Asia.
The BRI is envisaged to connect some 65 countries and 4.4 billion people which is almost 60 per cent of the world's population; it will account for one-third of global GDP and one-third of world trade in goods and services.
In fact, total BRI investments at maturity are estimated at US$4 trillion which is 13 times Singapore's GDP.
Third, Singapore must not shy away from China - the elephant in the room when it comes to competition for foreign companies. But China's tremendous growth offers as much opportunity as it does competition.
The next thirty years is a period of opportunity, as China surges forward in its aim to become a fully developed country when it celebrates the 100th anniversary of the People's Republic of China in 2049.
For now, Singapore will have to take a leaf from the book of Chinese idioms: Strike while the iron is hot. In other words, tap on the increased spending and liquidity the Chinese market potentially offers as its economy develops and incomes rise.
Singapore is not a sizeable market in itself. To thrive, it has to be a platform for the big markets.
Singapore's sustained success for competitiveness is really in the "ABC" – A for ASEAN, B for BRI and C for China.
Lawrence Loh is deputy head and associate professor of Strategy and Policy at NUS Business School. He is also director of the Centre for Governance, Institutions and Organisations at the school.
Editor's Note: An earlier version of this commentary indicated that V3 had listed on the Hong Kong Stock Exchange. That is not correct.
Source: CNA/nr

redpajama_set_name: RedPajamaCommonCrawl


Twenty years ago I was the smallest player on the soccer field. Although my twin sister and I were quite athletic (thank you Mom and Dad) and relatively skilled for 6 year olds, an innocent bystander would never have guessed that 12 years later we'd be standing at Drake Stadium ready to start our first UCLA Division 1 soccer game. The journey getting there definitely had its trials, triumphs, and moments of perseverance; but most importantly, it took extremely hard work. In fact one of my biggest lessons was that your genetic ability only takes you so far; it's the determination, dedication, discipline, and passion that take you to the next level. *(Take that as a life lesson as well).
If I hadn't learned the importance of those four things during my adolescence, I would never have advanced to where I did, especially at my stature. Playing at UCLA was one of the best experiences of my life. I not only had the opportunity to play alongside some of the most amazing soccer players in the nation and gather three Final Four appearances, but I also received a second-to-none degree and made some of the best and lasting friends a girl could ask for. Amazing, amazing, amazing—the people, the knowledge, the experience! I'll never forget what it was like to put on that uniform, walk out onto the brightly lit field and represent one of the best universities in the world. It was such a sense of pride, accomplishment, and inspiration.
I guess my point to all this is that although I've accomplished my goals, I'm not really done accomplishing my goals. I've had the experience, and now I want to give every girl who loves soccer the chance to have a similar experience. Fortunately, I've chosen a career path that will allow me to do this. After attaining my 200-hr yoga certification in LA, I decided (at 25 years old) that it was time to move back to my home roots and earn a certificate in NASM Personal Training.From there I have combined my soccer expertise (from playing at such a high level) and my knowledge of body movement (strength, speed, power, flexibility, athleticism) to become the most unique Soccer Performance Specialist in California. In addition to that, I am one of the only females in this field, and as far as finding a mentor for young girls, look no further. Who is better to answer your questions than the person who has walked in the shoes? So, this is my story. Let me help you create yours.