BA Boeing Co

By Robert Wall 

LONDON-- Airbus Group SE said it would merge its corporate headquarters with that of its commercial-jetliner unit and eliminate an unspecified number of management jobs in a fresh effort to improve profitability.

Chief Executive Tom Enders said on Friday that the restructuring would yield significant savings, facilitate faster decision-making, and narrow a profitability gap with rival Boeing Co. Both companies are scrambling to deliver planes to customers after racking up record sales.

The two headquarters being merged are both in Toulouse, France. The scale of the savings, as well as the number of layoffs and costs to see them through, aren't clear yet, Mr. Enders said. Those will depend on negotiations with labor representatives set to begin next Tuesday.

"We aren't just trying to get leaner at the shop-floor level, we are really starting at the top of the company," Mr. Enders said in an interview. He said he expects the moves will yield financial benefits starting next year.

Mr. Enders said the job losses won't be "insignificant" but will be smaller than the almost 8,000 jobs cut in a previous restructuring. The goal is to make the winnowing of management ranks "as thorough and substantial as possible," he said.

The initiative is the latest in Mr. Enders' four-year campaign to overhaul the company following the 2012 failed merger attempt with Europe's largest arms maker BAE Systems PLC. "For me this is the logical conclusion of the journey we started in 2012," Mr. Enders said.

After the deal faltered on German government opposition, he won shareholder backing for a new structure that reduced French, German and Spanish government involvement in company decision making. The old structure was a legacy of the founding of the company in 2000 through the combination of European aerospace and defense assets.

Airbus in 2013 moved to merge defense and space assets and shed some operations not central to its aerospace business. With the latest shift, the move of headquarters functions to Toulouse from their former home of Paris and Munich should also be completed, Mr. Enders said.

Even though the restructuring is focused on the group headquarters and commercial airplane unit, Mr. Enders said its defense and helicopter activities remained "integral" to the company. They would also benefit from reduced costs, he added.

Airbus also said Friday that as part of its revamp, Fabrice Brégier, who runs the commercial airliner unit, will serve in the newly created role of group chief operating officer, responsible for supply chain and other functions to underpin the combination of the airplane and group activities.

Despite an order book for jetliners that stretches out for several years, Airbus faces financial pressures. Costs to build its new A350 long-range jet have proved higher than planned. Its A400M military transport plane has suffered technical problems and delays, leading to repeated hits against earnings. In July, Airbus announced a cut in production of the poorly selling A380 superjumbo from 27 planes last year to 12 in 2018 and a return to losing money building the flagship jetliner.

Mr. Enders said those pressures weren't driving the reorganization. "The most important thing is the company becomes faster and leaner and thereby enables transformation across the entire group."

The chief executive has become increasingly concerned that faster-moving technology startups could steal some the company's business. Elon Musk's Space Exploration Technologies Corp., or SpaceX, has already reshaped the rocket business, driving Airbus also to pursue cheaper satellite launch options.

Airbus also faces stiff competitive pressure in its commercial plane-making business where it and its larger rival Boeing have enjoyed a period of record orders, swelling their combined backlog to more than 11,000 planes to be delivered. Now executives at both companies are focusing on how to build them profitably.

Boeing has been restructuring under Chief Executive Dennis Muilenburg, who took the top job last year after running the Chicago-based company's defense business. Mr. Muilenburg has refreshed Boeing's executive ranks, promising growing margins for the commercial airplane and defense units.

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

September 30, 2016 12:36 ET (16:36 GMT)

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