Trouble in the Cockpit; As Airbus sales slump and executives fall, the future of its two-headed Franco-German parent company is in doubt.

Byline: Tracy McNicoll and Stafan Theil

And so the dogfight over the Rhine came to a head. Two heads, actually. A round of midair musical chairs last week saw Noel Forgeard, the French co-CEO of EADS, the European Aeronautic Defense and Space Co., resign amid scandal. His German counterpart, Tom Enders, slid over to take his place at the top of the reporting chain for EADS's most prized and troubled possession, Airbus. Another Frenchman, Louis Gallois, stepped into the empty co-CEO seat. He and Enders promised to "work very closely" to end internal strife and restore customer confidence. But working jointly is arguably part of the problem. What many analysts say EADS needs is to slay the two-headed monster that is Europe's leading aerospace company and put one man in charge.

Founded in 2000, EADS was supposed to demonstrate the potential of a united Europe to compete with the United States and its aerospace industry. Investors were always skeptical, saying that co-CEO posts, shared by the French and Germans, were a typically European political compromise, and no way to run a business. The first French co-CEO, Philippe Camus, once brushed off predictions of national rivalry by saying, "We are Europeans."

True, the Airbus division, founded three decades earlier, thrived; by 2005 it topped Boeing in sales. But it's lost its momentum with stunning speed. Preliminary numbers for the first half of this year show Boeing with three times more new orders than Airbus. Not only is Boeing's hot new 787 Dreamliner running away from Airbus's entry in the 250- to 300-seat class, but the much-hyped A380 superjumbo is dogged by production delays and has received no new orders this year. Last week the new co-CEOs admitted the A380 is in "crisis" and said stabilizing the superjumbo is job No. 1.

No one is saying "we are Europeans" now. Indeed the crisis seems only to have magnified the infighting that is virtually built into the company structure. Not only do the French and Germans split the co-CEO spots, but in virtually all cases their chief underlings are from the other country. (One of the exceptions: the director of human resources is from Finland, which has a long tradition of neutrality, but that fact hasn't seemed to help.) In this unique system of "cross-reporting," the German head of Airbus, Gustav Humbert, had reported to Forgeard, but Humbert also resigned last week, taking responsibility for the A380 delays. He was replaced by a Frenchman, Christian Streiff, who will report to the German now in charge, Enders, thus preserving Franco-German symmetry in the upper echelon. But to skeptics, the fact that Streiff has no aerospace experience, and is close to French Finance Minister Thierry Breton, drives home the trouble with politicized job sharing.

Ironically, Forgeard was a reluctant occupant of the shared post. He had a rocky relationship with Enders, and had long pushed for a single leader--himself. "He had said it a little too loud and a little too often," says Pierre Sparaco, author of a French book on Airbus. "Forgeard is a man of planetary ambition little inclined to share power." That served him poorly in the reportedly bitter internal feuding before his fall, as Forgeard fought to survive charges that he had profited from the superjumbo's troubles. He allegedly sold stock options in March knowing that the A380 was bound for costly delays. On June 14, the day after Airbus announced the delays, EADS stock fell 26 percent, wiping out [eurn]5.5 billion of its value. He got no support from Enders, who remarked: "Of course it would have been lucrative to exercise the options in ...