Airbus spends €263 Million to Keep the A380 Safe because Capitalism makes Safe Airplanes

Posted by PITHOCRATES - May 19th, 2012

Week in Review

Free market capitalism is a beautiful thing.  It’s like a dog having puppies.  You don’t have to do anything but stand back and let it happen (see Airbus Earnings Hit By A380 Wing Cracks by Robert Wall posted 5/15/2012 on Aviation Week).

Airbus is taking another €158 million charge linked to the costs associated with wing component cracking on its A380s.

 That comes on top of a €105 million charge taken in March against 2011 results because of the same problem. “This final retrofit fix is more complex than initially anticipated in March; therefore, the group updated the cost for the retrofit solution leading to an additional charge of € 158 million in the first quarter,” Airbus parent EADS says in releasing its latest results…

Qatar Airways, for instance, has said it will only take A380s once the final fix is installed on its aircraft — the first handover to the Middle East carrier is due next year.

The fix also has hit A380 delivery plans. Airbus has temporarily slowed A380 production, but the impact of that move is not expected to be seen until 2013.

Airbus has a vested interest to make sure their planes are safe.  For an unsafe airplane is very difficult to sell.  Earlier reports stated that these cracks did not affect the safety of these aircraft.  But they have still hurt sales.  And slowed their production. 

Airbus has spent to date some €263 million ($335.85 million) to fix this problem.  Which is quite a sum considering one A380 has reportedly sold for $234 million.  So their spending the money to do what’s necessary to fix this problem.  Spending more than the cost of one A380 so far.  And the reason why they’re doing this is in part to the airworthiness directive issued by the European Aviation Safety Agency grounding A380s.   For you can’t sell an airplane that’s not allowed to fly.  But a customer not taking any more deliveries until the final fix is installed on its aircraft is also a very big incentive.  Because Boeing is out there with their 747.  And Airbus will do whatever necessary to make sure their customers don’t cancel those A380 orders and replace them with 747 orders.

It’s been said before.  Competition makes everything better.  It’s what makes free market capitalism the best system in the world.  And why aircraft built in capitalistic countries are the safest aircrafts in the world.  Because safe airplanes are easier to sell than unsafe airplanes.  And selling airplanes drive profits.  So when your system is based on profits it’s also based on safety.  Because safety drivess profits.  Unlike in the old Soviet Union. 

When they suffered the loss of a state-manufactured aircraft their greatest concern was embarrassment.  Looking inferior to the West.  Their people had no choice but to get on those same airplanes.  Because their state airline had no choice but to use the state-manufactured airplanes.  And the only incentive the state-manufacturer had to spend money on fixing problems was when the costs of those fixes proved to be less than the cost of lost airplanes.  And they would never spend more than the cost of one aircraft to fix a problem that hasn’t caused the loss of a single aircraft.

Airbus has a lot riding on the A380.  It was a very expensive airplane to bring to market.  It has to be a safe airplane to cover their investment costs.  So they will choose to spend what it takes to ensure its safety.  Because that’s what corporations do under capitalism.

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