Overview Section of Starbucks Paper

Milestone Two

MBA-665: Government Impact on Business

Southern New Hampshire University

Abstract

This memo addresses the business profile and government actions as they relate to Airbus corporate governance structure. Stakeholders, organizational team impact and the current financial and overall health of the organization and how the company addressed critical situations is explored.

Table of Contents

Introduction……………………………………………………………………………………..…4

Overview…………………………………………………………………………………………..4

Governmental Action……………………………………………………………………..6

Organization and Teams…………………………………………………………………. 7

Stakeholders…………………………………………………………….………………... 9

Current Environment………………………………………………………………….…. 9

Conclusion……………………………………………………………….………………………10

References…………………………………………………………….………………………….11

TO: Jack Harris, President Crisis Consulting

FROM: Gerette Bednarz, Vice President, Governmental Affairs

DATE: March 11, 2018

SUBJECT: Company Overview

Introduction

Airbus is currently facing internal and external investigations into possible fraudulent financial activities from 2007 to 2010. The company is accused of using secret firms and middlemen while dealing with the British government. These activities were not known to the Board or executives at the time and known involved parties have since been terminated. The organization is seeking your consult and assistance to directly address ensuing government actions.

Overview

Business Profile

The business proposal will be the development, production and use of an unmanned commercial passenger aircraft that will be and comprise the entire fleet of an airline also named AirVahana. The product name is Airbus AirVahana. The aircraft will be larger, faster and able to travel longer distances and fueled by sustainable means.

The commercial passenger aircraft market is a highly competitive a duopoly. Airbus holds about 50% of the market share, slightly above Boeing (Airbus Home, 2018). Market entrants in China, Russia and Canada, if successful, are likely to impact and transform competition in the coming years (Wall, 2017). In addition to market share Global Horizons (Airbus Home, 2018) forecasts global passenger travel to increase 4.4 per cent annually for the next 20 years, with 35,000 new passenger and freight aircraft dedicated deliveries and a potential 5.3 trillion USD revenue over the 20 year period.

As globalization evolves and progresses air travel will be used more as a means in the corporate world. Also, if the economy is stable and strong domestically and internationally, leisure travel will increase. This will be an opportune time for a faster, sustainable, cost effective and time efficient means to travel. The plan is for the unmanned fleet and airline AirVahana to be fully operational by 2023. An important component in the entire process of introducing new product and technology into the commercial passenger aircraft market is to consider current and potential government actions that impact the market and Airbus.

Global terrorism is on threat the company and industry faces. The public’s reaction to global terrorism can significantly decrease leisure travel worldwide due to fears of personal safety and security. If air travel decreases, airlines may not invest in new aircraft due to a decrease in cash flow and capital.

Another threat to Airbus is the highly competitive market with Boeing, as explained earlier. Also, if the aircraft does not acquire Federal Aviation Administration approval, there will not be an opportunity for an airline that only provides pilotless flights. Competition with Boeing in the duopoly poses a threat to Airbus as well. If Boeing launces a product similar to the one proposed it can alter the direction and plan to extend the product to an airline service.

Governmental Action

FAA

The concept of flying passengers all over the country in unmanned commercial aircraft will not be possible without meeting regulations and standards of agencies such as the Federal Aviation Administration (FAA). An aircraft cannot fly commercially in the United States without FAA approval (FAA, 2018). The Airbus A350-1000, for example, received FAA approval and certification just six months after application submittal and enduring intensive flight testing in November 2017 (Airbus Home, 2018).

FAA regulations of Unmanned Aircraft Systems (UAS), or drones, have been developed for vessels that do not carry passengers. Certified drones are used in the military, privately and commercially (FAA, 2018). One obstacle unmanned commercial passenger aircraft like AirVahana and helicopter passenger drones face is the development of certification and standards from these entities has yet to occur. Without certification the aircraft and airlines cannot operate commercially.

SEC

The Securities and Exchange Commission (SEC) is a federal governmental agency in the United States that provides oversight for companies and investors in the securities markets. The SEC works to ensure investors are provided with meaningful financial information by the public company prior to investing (SEC Home, 2018). Airbus is a public company and files with the SEC, providing necessary financial documents and disclosures for investors. While Airbus is in the process of developing and launch this new product and airline it is essential to ensure all necessary financial documents ae filed with the SEC. If the company fails to comply, there are costly legal and financial consequences.

Organization and Teams

Airbus’s organizational structure is designed to ensure the organization is managed in accordance with regulatory laws and standards and articles of association. This organizational governance structure includes a board of directors and executive committee. Corporate structure designed to adapt and change while managing growth, projects and obligations (Airbus Home, 2018).

Board of Directors and Executive Committees

The Board of Directors for Airbus is required to adhere to laws associated with the company’s Articles of Association and is responsible for the management of the company, which is delegated to the Chief Executive Officer (CEO) to manage and oversee day to day operations. The Board is also responsible for ensuring all regulatory laws, articles and standards are met legally. The Board is comprised of committee to ensure ethical and regulatory standards are met and in compliance: the Audit Committee, Ethics and Compliance Committee, The Remuneration, Nomination and Governance Committee and the Executive Committee. (Airbus Home, 2018)

The Executive Committee is a group of company executives tasked with supporting the CEO with day to day management of the company. The Executive Committee is comprised of company leaders from key operational departments: Human Resources, Military Aircraft and Defense, Commercial Aircraft and Helicopters, General Counsel, Airbus Americas, Commercial Operations, Finance, Procurement and Airbus China (Airbus Home, 2018).

The Board of Directors and Executive Committee are and have been essential in ensuring legal and appropriate investments are disclosed and sought out, defending the company in legal and liable suits that arise and have arisen, and compliance and oversight of regulatory standards (Wall, 2018). One example of the Board’s oversight is the Board’s response to alleged financial improprieties in 2014; reported publicly suspended payments to business partners while investigating compliance infractions through a payment review and disclosure of the internal investigation and ethical and financial compliance outcomes and processes (Airbus Home, 2018).

Operational Committees

Operational committees at Airbus are structured to manage and oversee operations and connectedness of the various sectors within the company. The Operational Executive Committee is comprised of leaders from each segment of the company’s operational structure: Human Resources, Commercial Aircraft, Strategy and International Relations, Engineering, Programs, Legal, Industrial, Commercial Aircraft, Commercial, Procurement, and Financial. The operational Executive Committee works alongside company subsidiary committees: Helicopter, Defense and Space, and Commercial Aircraft divisions. Within the operational structure are teams and subcommittees, regionally and globally designed to ensure ethical and financial compliance and adherence to regulatory and securities laws and standards as well as sharing and creation of technological and production designs and processes. (Airbus Home, 2018)

Stakeholders

Internal stakeholders for Airbus include investors, employees, board of directors and business partners. External stakeholders include customers, consumers that utilize product, communities, suppliers, vendors, and local and national governments. One example of stakeholder actions taken to influence and advocate for Airbus currently taking place. Airbus is seeking regulatory approval from China to deliver aircraft. Some obstacles that are slowing the approval process are political in nature and impact Germany and France operations. Both German and French leaders have met with China’s leaders to come to a political agreement in an attempt to perpetuate the approval process. Internally, top Airbus executives have met with China’s governmental officials to seek approval. To date the aircraft have not been released or approved for delivery to China (Ostrower, 2018). This scenario is one example of how stakeholders of a global operation are impacted and act in the best interests of the company.

Current Environment

Full Year 2017 Results (2018) reported, in Euros (EUR), that the company is financially healthy with 2017 revenues of 67 billion EUR. Net income in 2017 was 2.8 billion EUR, up from 995 million EUR in 2016. Free cash flow was 3.7 billion EUR in 2017 an increase from 2016 3.1 billion EUR. Also reported was an increased order backlog worth 158 billion EUR of aircraft orders (Full Year 2017 Results, 2018). Stock market shares have increased to 1.99 USD per share (Airbus SE ADR, 2018).

Response by Airbus Board and executives to address allegations of fraudulent financial activities was launched in 2017, according to Pegg (2017) and Airbus Home (2018). The company was allegedly involved in secret deals and money exchanges from 2007 to 2012 resulting in SEC and other regulatory investigations (Pegg, 2017). Airbus Board of Directors separated key personnel involved in the activities as well as launched a full internal investigation in 2017. The Board and Airbus has also fully cooperated with the SEC and involved officials (Airbus Home, 2018).

Conclusion

Airbus has to interact operationally and financially with regulatory and governmental bodies throughout the world. The organizational structure is implemented to provide checks and balances as well as to remain attached and informed of business dealings. There are times that the corporate leaders are not informed of questionable activities. Governing bodies like the FAA and SEC provide oversight to ensure regulations and laws are complied with by the company. Stakeholders impact and are affected by corporate decisions and activities and have influenced or attempted to influence government officials in the certification and approval processes. Currently the organization is financially healthy despite allegations of fraudulent financial activities from 2007-2010. The company’s leadership is seeking consultation assistance in order to maintain and continue financial health as well as design and manufacturing operations.

References

Airbus Home. (2018). Retrieved from http://www.airbus.com/ Airbus SE ADR. (2018). Retrieved from https://www.marketwatch.com/investing/stock/eadsy/financials Federal Aviation Administration. (2018). Retrieved from https://www.faa.gov/ Full-Year 2017 results: Airbus overachieved on all key performance indicators. (2018, February 15). Retrieved from http://company.airbus.com/news-media/press-releases/Airbus-Group/Financial_Communication/2018/02/AirbusFY2017 Ostrower, J. (2018, January 12). Airbus built a lot of planes for China last year. Retrieved from http://money.cnn.com/2018/01/12/news/companies/airbus-china-certification-delivery-delays/index.html Pegg, D., & Evans, R. (2017, September 18). Airbus launches internal corruption investigation after Guardian exposé. Retrieved from https://www.theguardian.com/business/2017/sep/18/airbus-launches-internal-corruption-investigation-after-guardian-expose SEC Home. (2018). Retrieved from https://www.sec.gov/ Wall, R. (2018, January 13). Airbus Seeks Resolution to Germany Corruption Probe. Retrieved from https://www.wsj.com/articles/airbus-seeks-resolution-to-germany-corruption-probe-1515869310 Wall, R. (2017, July 16). New Jets Threaten Airbus and Boeing Duopoly. Wall Street Journal. Retrieved from https://www.wsj.com/articles/new-jets-threaten-airbus-and-boeing-duopoly-1500202802 Steiner, J., & Steiner, G. (2012). Business, government, and society. Los Angeles: McGraw Hill.