Airbus Is Rocking Boeing’s World

A gutty 50-year-old New York City native who grew up selling hamsters for pocket change is the unlikely champion of Airbus Industrie, a highflying European aircraft maker that is looking to topple America’s premier aerospace company.

John J. Leahy is the head salesman and the only high-ranking American at the Toulouse, France-based consortium. Under his hard-charging marketing leadership, Airbus has been transformed from an upstart to a contender on the verge of overtaking Boeing Co. as the world’s largest commercial airplane maker.

With Leahy’s prodding, Airbus is taking its biggest gamble yet. Last month, Airbus shareholders approved spending $11 billion to produce the world’s largest jet, hoping to land the knockout punch to Boeing’s last dominant model and America’s most lucrative export, the venerable 747.

The decision to produce the double-decker A-380, which would seat as many as 800 passengers and dwarf the largest aircraft available today, the 420-seat 747-400, came in no small measure because of Leahy’s doggedness.

Leahy, described by close associates as a street fighter of Napoleon-like stature, signed up six companies for 50 of the yet-to-be-built jets--enough to begin production. He handily beat out Boeing’s proposal for the 747X, a modified, larger version of the 747. Boeing says it is still committed to developing the plane, but so far there have been no takers.

“He’s tenacious,” said Hollis Harris, chairman of World Airways who was also head of Delta Air Lines and Continental Airlines. “He just doesn’t take no for an answer, and that’s one of the characteristics that has helped him be successful.”

Leahy followed up with a major deal last week to sell 10 cargo versions of the A-380 to FedEx, the first North American buyer for the plane and the first big customer for the freight variant.

“Whether you like him or not, he deserves a large credit for where Airbus is today,” said Richard L. Aboulafia, director of aviation consulting for Teal Group, a Fairfax, Va.-based research and consulting firm.

Leahy’s aggressive style has ruffled not only Airbus’ archrival, but also some of his colleagues at the French firm. In one of his more outlandish stunts, the senior vice president paraded American-style cheerleaders through a sales meeting, prompting snickers from his sedate colleagues.

“He gets a real kick out of beating Boeing,” said George Hamlin, senior vice president of Global Aviation, a Washington-based commercial aviation consulting firm and Leahy’s former colleague at Airbus. “He’s extremely competitive. He’s driven by good, clean, old-fashioned hate.”

Indeed, Leahy is not shy about mocking Boeing, often in harsh terms. In an interview at a New York restaurant recently, Leahy called the company “a big bully.” It has become complacent and is overrun by “paper-pushing bureaucrats,” he added.

“Has Boeing lost its luster? Absolutely,” Leahy said.

Case in point, he said, is what some have called Boeing’s secret weapon in its battle against Airbus over the super-jumbo jet. Boeing, saying the market is too small to justify spending billions to build a new airplane, has been trotting out John Sutter, the 79-year-old legendary engineer, hoping to convince airline officials that they just need a larger version of the 747. Sutter helped develop the 747, which first went into service in 1970.

To Leahy, having Sutter as part of Boeing’s sales team underscores the firm’s doomed marketing strategy.

“They were all in awe, but the poor guy was put in a situation where his time had passed,” Leahy said. “I certainly wouldn’t try to sell an Intel Pentium IV computer by bringing out someone who invented the vacuum tube, and that’s exactly what they are doing.”

Boeing officials declined to talk about Leahy, although some grudgingly acknowledged Leahy’s selling abilities. “We have a lot of respect for him,” a Boeing spokesman said. “He’s good at what he does.”

But the no-holds-barred, win-at-all-costs philosophy has left Airbus mired in controversy. Allegations of influence-peddling, contained in lawsuits filed in Canada and India, have swirled around the company’s aircraft sales to those countries. Two years ago, U.S. officials complained that Airbus was a frequent offender in offering bribes to make sales in international markets.

Boeing and U.S. trade officials have also attacked Airbus as an unfair competitor because of its government subsidies. Airbus has been operating as a consortium of partners from France, Germany, Spain and Britain. Boeing has maintained it is competing not with an investor-owned company like itself, but with an entity that can borrow at low interest rates and run up losses as long as it keeps workers employed in its supplier countries.

Airbus officials vehemently denied any wrongdoing and U.S. claims of unfair competition, saying it must repay loans from its partners and that it must earn a return on capital like anyone else.

“What you are are seeing is Boeing trying everything possible to stop the A-380, first telling the world that there was no market for it, then saying that the market is small and now saying it is a trade issue.” Leahy said. “They are always denying us the right to compete.”

Still, aerospace analysts say that, though Leahy is good at what he does, he benefits from Airbus’ unique financial structure.

“To be a salesman unfettered by the bottom line is a dream job, and that’s what he has,” Global Aviation’s Hamlin said.

In any case, multibillion-dollar deals with some of the world’s top airlines were not common at Airbus when Leahy joined the company’s sales staff in 1985. Few Americans had even heard of the company because not many domestic airlines were flying its planes.

“I could remember being quite delighted if people would actually listen to a presentation,” Leahy said. “Airlines didn’t want to waste their time listening to Airbus. They would say, ‘If it isn’t Boeing, we’re not going.’ ”

Leahy was given the formidable task of cracking the North American market, the world’s largest and one in which Airbus had a dismal record. It had made just one sale since the consortium was formed in 1970.

The goal initially seemed insurmountable for Leahy, who had sold small private airplanes made by Piper Aircraft. But such obstacles were not new for Leahy, who earned a master’s degree in business administration from Syracuse University while working nights as a cargo pilot to pay the tuition.

Within six months, Leahy had closed a deal with the now-defunct Pan American World Airways, coming up with complicated financing to help the cash-strapped airline. The deal, though questionable, led to an extravagant black-tie party at New York’s Museum of Modern Art that depleted Airbus’ North American marketing budget for the year.

Soon, U.S. airlines were lined up to buy Airbus planes, including Continental Airlines, Northwest Airlines Corp. and AMR Corp.’s American Airlines.

Leahy’s biggest coup came in 1992, when United Airlines, Boeing’s biggest and most loyal customer (it was established by company founder Bill Boeing), ordered 100 A-320s after having rejected Airbus three times.

The United sale helped propel Leahy to the top job at Airbus’ North American unit in 1992. In 1995, the year he took over the top sales post at its European headquarters, Airbus registered 106 orders to Boeing’s 468. That proportion would quickly change.

Leahy became both one of the most hated and beloved officials at Airbus as he pushed his employees and demanded results, sometimes putting departments in competition with each other for contracts.

“There is quite a diversity of views about John,” said a former Airbus salesman who worked for Leahy in the early 1990s. “You’ll hear he’s a great salesman, and you’ll also hear lots of expletives.”

Meanwhile, large markets such as Latin America and China that had long been under Boeing’s control quickly opened up for Airbus. By 1999, Airbus had grabbed 55% of all orders, though Boeing continues to deliver more planes per year--60% of all deliveries to Airbus’ 40%.

Leahy’s next big challenge is Japan, Boeing’s last stronghold--80% of planes operated by Japanese carriers are built by the Seattle-based company.

“We’ve got a better product and that will sell itself,” Leahy said. “I’ve built a career around doing this, and I’m going to do it in Japan.”

Last week, Airbus announced it is looking to boost its relationship with Japanese aircraft makers and is expanding its presence there by creating an Airbus Japan unit. Airbus recently approached Mitsubishi Heavy, Kawasaki Heavy Industries and Fuji Heavy Industries to participate in the production of the A-380. It’s a move intended to break ties to Boeing going back more than 30 years.

Hoping to prevent Airbus’ incursion, Boeing officials have been talking to the Japanese companies about participating in the manufacture of the 747X, the company said this month. But the proposal immediately drew sharp protest from Boeing’s biggest union, which said it would cost thousands of U.S. jobs.

The competition from Airbus has apparently given airlines more leverage to negotiate better deals with Boeing. Thai Airways International said this month it is buying two Boeing 747-400 aircraft for $147 million apiece after Boeing agreed to cut the price by $8 million. Boeing had already offered to reduce the initial price by 15% to $155 million, Thai Airways said. The discounts came after Thai Airways threatened to turn to Airbus if Boeing didn’t cut the price for the planes.

“They’re trying to convince the world that things haven’t changed and that the 30-year-old technology they’re relying on is still good,” Leahy said.

“Well, I have news for them. Things have changed.”

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Air Wars

Orders for Airbus Industrie planes have increased sharply since New York native John J. Leahy became head of sales for the European aircraft maker in 1995. Airbus hopes to surpass Boeing as the world’s largest commercial aircraft maker with the help of its new A-380 super-jumbo jet, above, which can seat up to 800 passengers.