Noël Forgeard, the onetime protégé of Jacques Chirac, has been ousted from his position as co—CEO of Airbus parent EADS.  Also 'resigning' is the German co—CEO of Airbus itself, Gustav Humbert. The two had been all but openly squabbling over responsibility for the delays in the production of the A 380 superjumbo jet.

Both men are being replaced by politically—connected members of the French business—government elite. Forgeard apparently remains under investigation on suspicion of insider trading in his family's sale of stock just prior to the announcement of bad news which drove down the stock price a quarter in one day, his ultimate fate is unclear.

One has to question how far the reform really will go at Airbus. Forgeard is being replaced with Louis Gallois, currently head of SNCF, the French state—owned railway and Humbert with Christian Streiff, former deputy CEO of French building materials group Saint—Gobain. Humbert does have an aerospace background, as head of Aerospatiale, best known as builder of the Concorde, which built and sold only a few copies, hardly an auspicious omen, for a company whose order book for the A 380 has languished. Nevertheless, this was ancient history by the time Humbert led the company, which was folded into Airbus.

There is as yet no sign of structural reform at EADS or Airbus. The awkward co—CEO designation remains in place at both EADS and Airbus. Although it is being said by EADS that Airbus will be more thoroughly integrated with EADS, the precise nature of the changes is yet to be revealed. Dominique de Villepin's promise to rebuild the management structure 'from scratch' is apparently inoperative.

It appears to some informed observers that highly politicized nature of Airbus remains, and may even be reinforced. 

'The major shareholders clearly recognized the need for change, but this is like treating a broken leg with a band—aid,'' said Doug McVitie, managing director of Arran Aerospace, a forecasting company based in Dinan, France. 'They need to streamline the management structure and have one CEO with complete authority. That they haven't done yet shows this is still a Franco— German political entity.''

Other observers put a better gloss on the matter:

'This is a strong decisive move which is bound to reinspire confidence,'' said Richard Aboulafia, vice president at Teal Group, a consulting company in Fairfax, Virginia.

The elevation of Gallois has meanwhile set off a political musical chairs game within France: 

Gallois' successor at the SNCF railways, a sensitive post in the run—up to French elections next year, is to be Anne—Marie Idrac, the head of Paris public transport operator RATP, Breton said. Idrac would be replaced at the RATP by Pierre Mongin, chief of staff at Prime Minister Dominique de Villepin's office, he added.

Meanwhile, an important deadline for Airbus looms in mid—July, the Farnborough Air Show in England, at which Airbus is expected to announce plans for its competitor to the Boeing 787. If the company, as expected, announces an all—new model, the source of financing is almost certain to become a political issue. The deep involvement of French Finance Minister Thierry Breton in the discussions of the past 9 days does suggest that some form of state finance will be important. If so, the United States can be expected to take strong measures.

As yet unclear, but supposed to have been announced by now, is the price British Aerospace is to receive for its 20% ownership of Airbus. The planned sale was announced prior to the bad news which drove down EADS' share price. There has been public mention of a possible lawsuit if the price determined by an outside investment bank is deemed too low by BAe.

Hat tip:  Jack Risko, Dennis Sevakis

Thomas Lifson   7 2 06

Update: Rothschild, the investment bank hired to set a value on BAe's 20% stake in Airbus, has set the figure at 2.75 billion euros, or 3.5 billion dollars, considerably lower than the 5 billion euro figure which had been mentioned in some earlier reports. BAe shareholders must approve the transaction.