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Renegotiating Aircraft Orders

Marwan Lahoud
Former Chief Strategy and Marketing Officer at Airbus & Former CEO at MBDA

Learning outcomes

  • How airlines could approach renegotiating aircraft orders
  • Outlook on the MAX coming back to market
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Executive Bio

Marwan Lahoud

Former Chief Strategy and Marketing Officer at Airbus & Former CEO at MBDA

From 2007 to 2017 Marwan served as Chief Strategy and Marketing Officer of Airbus and was a member of the Group Executive Committee. Marwan is credited with having been the chief architect behind the creation of both Airbus and MBDA and also a key individual in the decision to re-engine the A320ceo to launch the A320neo. He led the strategic and international development of Airbus to position it as a global enterprise: during his tenure, the order book of the business grew from €265bn to more than €1,000bn. Previously, Marwan served as CEO of MBDA, the global missile systems company jointly owned by Airbus, BAE Systems and Leonardo. Having begun his career at the French Ministry of Defense in 1989, Marwan was appointed Special Advisor to the Ministry in 1995. Read more

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Interview Transcript

What would you do with the orders you have, from the airframers? Defer them, cancel them? How would you be looking to negotiate with them?

Let’s not be naïve. Orders are very complex matters. Cancellations are never straightforward cancellations. It’s an ongoing negotiation. You have two airframers. I remember, in 2008, we spent six months of the year reallocating planes, from one airline to another, negotiating cash etc. If I were them, I would be looking for conditions with the airframers. I don’t say cancelling or deferring because, at the end of the day, it’s always conditions.

What about with Boeing and the MAX? If they miss delivery for 12 months, I suppose you can cancel without a fee or a penalty?

They have started having real cancellations. The MAX issue predated the Covid; it was nothing to do with Covid. The light was shed on it by Covid. Until just before Covid, when there was a change of CEO, they were saying, no, no, not a problem; we’ll be out soon. The magnitude of the issue started to be visible, somewhere in February and then you have Covid.

I’m not in their shoes, but if I were, I would bite the bullet. For the time being, they have not accepted the fact that they need to redesign parts of the system. They are still saying, we’re going to patch this and it’s a slight software modification. As long as they do not accept that, okay, we have a problem, we need this plane, there is no way we’re going to launch a 15 billion development that will be available in five years’ time. This is one of the effects of Covid; because we need this plane and we need it quickly, we are going to have a full redesign review of it and we will be spending the money it takes, to make it fly safer. As long as they remain in this, oh, it’s no big deal behavior, they are not out.

What do you think is so hard about making that decision?

Again, I’m missing insights, I would say. Here we move to these leadership facts. There is one rule that suffers no exception. When you have a team around you, you need to be conscious of the skills and you need to be conscious of the profile of each individual and you need to have people playing within their skillset. Let me explain that in more practical and prosaic terms.

Let the engineers do the engineering. Let the lawyers deal with the legal matters. Let the risk managers assess, measure and advise on the risks. Your job, as the leader, is to make decisions. When you make decisions, you make decisions within a frame, and there is no decision that optimizes everything. Deciding is choosing and choosing is giving up.

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