28 Apr 2016
Paul Kahn EMBA 1994 returned to the UK from Canada in 2014 to head up Airbus Group's British operations. He talks about his biggest achievements since taking on the role and why leaving the EU would be bad for UK companies
Paul Kahn pulls no punches when talking about Britain’s potential exit from the EU. The president of Airbus Group’s UK operations believes leaving the common market would see British businesses flying blind into uncharted airspace.
Kahn’s warning is not without substance. The Confederation of British Industry (CBI) claims that Brexit could cost the UK economy £100 billion – amounting to 5% of the nation’s GDP – and 95,000 jobs by 2020.
Leaving the EU would see British exports hit with tariffs, forcing companies to pass the costs on to customers, the CBI claims. Moreover, it says Britain would face economic uncertainty and wavering confidence among investors while trying to strike trade agreements with EU countries and non-union members.
Such talk is worrying for Kahn, whose company designs and produces aircraft wings, landing gears and fuel systems in the UK, assembles planes in France and Germany and sells products around the world.
“We make use of the European single market to compete globally in this industry and anything that changes that is bad news,” Kahn says. He adds that placing tariffs on British goods or services following Brexit may impact the group’s ability to be competitive. “We’d be at risk of selling fewer aircraft, helicopters and satellites, because customers don’t want to pay more.”
Another headache for Airbus is the restrictions placed on skilled EU workers moving to or from the UK if Britain leaves the union. “I’m not interested in any sort of trade barriers between our sites in Europe,” says Kahn, who has an Executive MBA (EMBA) from London Business School (LBS). “Coming out of the EU places risks on us in terms of people, resources and market access. A simple thing like hiring someone could lead to a three-month delay, because we’d have to apply for a visa.
“It’s very easy to criticise the EU and the red tape that comes from Brussels, but having run a business in Canada [Kahn was president and CEO of safety and security systems developer Thales Canada] and being responsible for businesses in the US, it’s much easier to trade with EU nations when the country you work in is also a member.”
In May 2015, Kahn caused a stir when he told Sky News that Airbus’s future investment in the UK could be jeopardised if Britain left the EU. The comments came six months after Airbus revealed plans to invest £100 million in research, development and training at its Broughton and Filton factories in Wales and England respectively.
Airbus UK will spend £48 million on developing new systems and technologies for building aircraft wings at its Broughton plant, which accounts for 6,000 of the company’s 16,000 UK-based employees. The research and development will be carried out with the Aerospace Technology Institute as part of a £2 billion joint investment between industry and the government. The partnership is aimed at securing more work for the UK on future aerospace programmes.
At the time of Airbus’s announcement, British Prime Minister David Cameron said that the nation’s aerospace industry supported more than 100,000 jobs across the UK and was worth more than £27 billion to its economy.
“The EU referendum is a big concern,” Kahn admits. “In 2014, Airbus Group could have invested in the productivity of its British factories or opened a new one somewhere else in the world – it chose to make its UK operations more efficient. The result of that is we’re producing more wings faster and at a lower cost, which contributes to the UK’s prosperity.
“That investment could have gone to Germany, Spain, China, or the US, so it shows that Britain is an attractive business environment – and being part of the EU makes it more attractive to the Airbus Group. Would leaving the EU affect Airbus’s future investment in the UK? Yes.”
Back to school
Whether Britain leaves the EU remains to be seen. Whatever the outcome, Kahn will continue to focus on developing the company he joined in October 2014. He arrived at Airbus after spending nearly 19 years at Thales, where he held several top positions including vice president of business development and president and CEO of the company’s Canadian operation.
Before that, Kahn cut his teeth as a trainee engineer for Ford Motor Company, where he worked from 1984 to 1987. Kahn then spent eight years at the UK Ministry of Defence (MoD), a period in which he took an EMBA at LBS from 1992 to 1994.
“I really enjoyed my time at LBS, but it was really hard when working full-time and studying for an EMBA at the same time,” he says. “I learnt a lot about finance, managing people, organisation and strategy. I came from an engineering background and was working at the MoD, so I needed to develop my understanding of finance and strategy. Being at LBS gave me the strategic, financial and communication skills needed to work in management roles.”
Those skills have served Kahn well throughout his career – and in his current job. During Kahn’s tenure, the company has brought the A400M, a cargo aircraft for the British Royal Air Force, into service, and seen an increase in demand for other military planes and helicopters.
Kahn has also overseen the ongoing integration of the company’s three divisions – Airbus, Airbus Defence and Space, and Airbus Helicopters – to establish a single approach where all business operations are aligned. It is no small feat for a group that provides everything from space probes and satellite communication systems to cyber security and helicopter pilot training.
“We previously had five different, independent operations, but the aim going forward is to have an integrated group,” Kahn says. “That’s achievable by making sure the divisions are joined up in terms of communications, finance and HR, and by having the right people in charge of those operations. My job is then to govern the group and make sure we’re as efficient and effective as possible.”
Other responsibilities for Kahn include helping maintain Airbus’s leading position in the global aerospace industry and satisfying strong demand for aircraft. “Airbus is very hungry and competitive and we love to win,” he says. “The company has gone from 18% to 50% market share in this industry in the past 30 years by competing successfully with Boeing. Our challenge is to ramp up production to secure orders and turn them into aircraft deliveries. We have a nine-year backlog of orders, which is part of being a globally successful business.”
Demand for the A320neo, a single-aisle passenger plane, has helped boost aircraft sales in recent years. As of January 2015, the company had 4,500 firm orders for what is now the most successful selling aircraft in aviation history. Kahn attributes the plane’s popularity and Airbus’s recent success to the group’s integrated operations across Europe. “It’s all down to teamwork,” he says. “The landing gear and fuel systems are designed in Bristol, the wings are manufactured in north Wales and the whole aircraft is put together in France or Germany.”
While good for business, the order backlog poses a long-term challenge that not only affects Airbus, but all aerospace businesses with big commitments to customers: how can companies increase production and boost productivity when facing an industry-wide skills shortage?
With experienced engineers in short supply, Airbus has launched an entry-level scheme to attract and train young people who can help fill the gap. The company provides internships and graduate programmes to encourage younger generations to work in the aerospace industry.
Kahn believes investing in training programmes today will create a pipeline of engineers for the future. But while demand to join Airbus is high, the aerospace industry is struggling to attract school-leavers and graduates. “Our entry-level schemes are massively oversubscribed with 10–30 people vying for every position,” he says. “We’re seen as an attractive employer, which is very encouraging, but the industry has a shortage of engineers.
“The challenge is to make aerospace more attractive to kids at school. We aim to do that through our Industrial Cadets scheme, which is an engagement programme with schools to get kids to spend a week or two with us and gain some work experience. It’s about showing secondary school kids, particularly girls, that engineering is a very attractive career.”
For Kahn, Airbus has the kudos to attract fresh talent and keep generating strong sales over the coming years – even if Britain exits the EU. While leaving would likely affect the UK business, its history and track record suggest Airbus will continue to soar after navigating any turbulence, whatever happens on 23 June.
Author: Rob Morris