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A Conversation With Guillaume Faury, Airbus CEO, on the Draghi Report

The Draghi Report identifies three areas of action he considers necessary for strengthening European competitiveness: innovation; competitive decarbonisation; and security through reducing dependencies. Airbus operates in all three of these areas. What are your reflections on Mario Draghi’s proposals?

We strongly agree with the Draghi Report’s analysis and themes, especially the emphasis on scalability. We operate in a rapidly growing industry with a high rate of innovation, which raises questions around sovereignty, particularly in the defence and space sectors. Our supply chains, which are also critical, need to be secure.

The priorities Mario Draghi identifies aren’t new. What’s encouraging is that they’re now set out in a visible report that provides a comprehensive vision. This must now lead to action. If Europe doesn’t act, it will continue to lose competitiveness. But it has the resources to avoid this downward spiral. Some key decisions are needed to implement these measures.

Where should this begin?

With a change of mindset: Europe once saw itself as a dominant force, a market and economy that set the global standard. This may have been true historically, but it’s no longer the case today. It’s not even really the point. We need to see the world as it is and adapt our vision of Europe accordingly. Powerful players like the United States and China are playing by their own rules; it’s up to us to adapt ours to fit what is happening globally.

As you mentioned, both Letta and Draghi point to the importance of scalability to encourage the growth of a European industry. However, fragmentation seems to complicate the emergence of a truly European technological and defence base. What tools do we have to strengthen the single market and support a credible defence policy?

To illustrate the importance of scalability, I’d like to give two examples — one successful, and one that’s still a challenge.

The most successful example is commercial aviation. Fifty years ago, the French, German, British, and Spanish governments joined forces to create a manufacturer that combined each country’s strengths. This collective effort gave rise to the Airbus commercial aviation business. A few decades later, we have succeeded in becoming a global leader. This shows that when we work together, not against each other in Europe, we can achieve the scale needed to become global leaders.

I often say that if we still had separate French, German , Spanish, and British aircraft manufacturers, none would be big enough to invest and innovate — in short: we wouldn’t exist anymore.

Powerful players like the United States and China are playing by their own rules; it’s up to us to adapt ours to fit what is happening globally.

Guillaume Faury

There are areas, however, where we haven’t made this effort and now lack any significant presence. If we insist on maximum competition within Europe, believing it best serves citizens’ interests, we risk creating excessive fragmentation. While maximum competition may benefit certain short-cycle sectors, it prevents sufficient scale in industries requiring substantial, long-term investment, it prevents players of sufficient size and power from existing. Today, we find ourselves  without players able to make significant investments in technologies such as cloud computing, artificial intelligence, defence systems, and telecommunications.

And the example that didn’t work?

That would be defence.

Several reasons explain this, but here are some well-known figures: the United States spends three to four times more on defence than the 27 EU member states combined. Since the largest proportion of this spending is directed toward investment and equipment procurement, Washington’s annual spending on defence equipment is five times that of EU member states. Furthermore,  the U.S. buys almost exclusively from American companies, while the EU buys about two-thirds of its equipment from outside Europe. It’s simple maths: two-thirds of one-fifth, or around 6%. In short, Europeans buy in Europe the equivalent of 6% of what Americans buy domestically. This gap is enormous.

Furthermore, these purchases are fragmented. When possible, European countries buy from their national industries. We have 17 different tank models on this continent, while the U.S. has one. The same goes for frigates and fighter jets. So, this 6% is also fragmented.

How do you explain the fact that Europe still has a defence industry?

If we haven’t disappeared completely, it’s because we have occasionally pulled together. Together, we’ve produced the A400M military transport aircraft, the Eurofighter Typhoon, the Tiger combat helicopter, the NH90, and missiles, among others.

We’ve also been able to leverage the dual-use of civil and military platforms to create scalability across civil and military sectors. This was done with Ariane and with helicopters — apart from the NH90 and Tiger, all other Airbus helicopters are civil-military dual-use. The H160, for instance, originally developed as a civil-military project, was later selected by the French Army. The MRTT, the world’s leading tanker aircraft, is based on a civil long-haul aircraft, the A330.

Despite these initiatives, Europe’s defence sector remains small, and we are largely dependent on Washington, as around 40% of European equipment comes from the USA. To put it plainly: our fragmentation reinforces American scalability.

European countries, sovereign in defence and security, must find ways to cooperate and build the scale needed for the substantial investments defence technologies require. It’s challenging for us to accept delegating a degree of sovereignty to Europe, and defence cooperation is much harder than in civilian sectors. Yet, it’s at least as important, if not more so, in today’s world.

I am deeply shocked by the European finance industry’s misplaced distrust of defence companies.

Guillaume Faury

In a technological ecosystem like Airbus, where many suppliers coexist in the value chain, could the recent change in the EIB’s mandate to allow investment in defence and security SMEs make a difference?

Over the past decade, we’ve been surprised by the European financial world’s lack of trust in the defence sector. This is unusual; it’s not the case in the United States, for example. The investments needed today are substantial, and if we don’t invest in defence, we simply won’t be safe tomorrow. This is why we strongly oppose excluding defence from a certain investment categories — particularly so-called sustainable ones. It’s illogical. Security is fundamental to prosperity and investment in decarbonisation.

I am deeply shocked by the European finance industry’s misplaced distrust of defence companies.

The Russian aggression in Ukraine has shifted the situation somewhat. The partial change in the EIB’s mandate is welcome, but it’s still less than what’s needed from financial institutions.  In practice, many still refrain from investing in defence companies.

We’re making progress in the right direction, but we have a long way to go. There’s a key issue here: defence is a broad concept, and it’s not always easy for financial institutions to understand exactly what it encompasses.

Mario Draghi highlights a dilemma: “Increasing reliance on China may offer the cheapest and most efficient route to meeting our decarbonisation targets. But China’s state-sponsored competition also represents a threat to our productive clean tech and automotive industries.” You’ve said that security is a prerequisite for decarbonisation, but can European industrial competitiveness really align with climate goals?

Yes, but only if we are clear on our shared priorities and focus more on what unites us than divides us.

Ideally, we should focus on sectors where we are already strong, as it’s easier to stay competitive and improve. Competing in sectors where we are already disadvantaged is far harder. We’re talking about fast-changing, high-investment industries.

Aviation, and aeronautics overall, is one sector where we can become global leaders and achieve the sector’s fourth revolution — that of decarbonisation. To do so, we need support, not obstacles. Unfortunately, European countries tend to react differently: when something succeeds, they tax, regulate, restrict, and view it with embarrassment rather than pride. This is a stark contrast with the United States. In aviation, I argue that we should be supported to excel, not constantly hindered. Otherwise, we may find ourselves in the same situation as the automotive sector – once a European strength, now struggling with global competition due to internal obstacles.

That said, it would be hard to deny that decarbonisation and its implications will impose, at least in the short term, constraints on your sector. What are the main challenges, and how are you addressing them?

Decarbonisation can either be a constraint or an opportunity — an aircraft that use less fuel is more competitive. Economics and ecology align here, giving us every reason to accelerate.

Other challenges are, admittedly, more complex. Sustainable aviation fuels, for example, offer a way to decarbonise aviation but are more expensive and harder to produce than jet fuel. In this case, competitive and environmental goals are in conflict. We must find ways to reconcile these or ensure a level playing field globally, enabling everyone to meet the same objectives.

Aviation safety is an illustrative example.

Today, we’ve achieved impressive levels of safety; aircraft fly at 10,000 metres, travel at 1,000 kilometres per hour, and fly at -50 degrees Celsius. Yet air travel remains the safest way to get from point A to point B. After World War II, in 1944, the Chicago Convention was signed to make airspace accessible and establish high standards of safety that have evolved to reach today’s levels.

For decarbonisation, we need something similar – a global standard  for sustainable fuels and the path to decarbonisation.

What complicates its adoption?

We don’t yet have a common regulatory framework for the decarbonisation of aviation at the ICAO level, nor a global roadmap for the adoption of sustainable fuels. Countries’ approaches vary significantly, which is a major hindrance.

Europeans must reach internal consensus while also understanding the importance of global agreement to negotiate with other major players. Even if it’s not perfect, a global compromise is better than an excellent European system that stands apart, ultimately slowing global progress.

The path to aviation decarbonisation can take two directions: sustainable aviation fuels, as you mentioned, or innovative technologies like hydrogen-powered aircraft. Which is the priority?

At Airbus, we are working on two main initiatives to decarbonise the sector. The first, and most widely accepted, is sustainable aviation fuels (SAF),  a new area of innovation and investment with great potential, provided there’s a stable regulatory framework. SAFs come in various forms, including biofuels and synthetic fuels made by extracting carbon from the air and combining it with hydrogen. These will account for more than half of the decarbonization path by 2050 and can be used in “conventional” aircraft already in use.

The other initiative is hydrogen-powered aircraft, which emit no carbon in either use or fuel production if green hydrogen is used. This requires new aircraft, regulations, and infrastructure.

Developing the green hydrogen industry is also key. It’s promising but still a long way off. Our goal is to have the first commercial aircraft of this type by 2035, but  this doesn’t address the immediate need to find solutions.

In both cases, decarbonising aviation will require major investment. Are you looking to European public programmes — well suited to such a strategic market with few global players — or relying more on private funding?

The first step is a regulatory framework that attracts private investment. I’m not saying that public funding isn’t needed or useful — but it’s taxpayer money. We need to tap the vast private capital reserves. Many investors already want to invest in the energy transition, knowing it’s essential. Climate change is real: the data and the scientific consensus are there – there’s no room for doubt.

This calls for an investment revolution. Investors, however,  hesitate due to a fragmented, unstable regulatory environment. Conditions for large, stable investment aren’t in place. The first priority is a unified regulatory framework ensuring stability and guiding substantial funds into decarbonisation.

At Airbus, we want to be a catalyst for the development of SAF, and we’re doing this in a number of ways, including through small-scale investments with partners, combining our strengths to bring projects to fruition.

Finally, we need an investment framework that rewards private capital with returns on investment. Currently, investors looking to invest in innovation, with some risk but good returns, look to the U.S.

What role should public funding play here?

In certain areas, it’s difficult to create a profitable model attractive to investors. Government must lead by investing in technologies that won’t be profitable at first. The Draghi Report’s much-discussed €800 billion per year shouldn’t frighten us. Given what was mobilised quickly during the pandemic, I have no doubt Europe has the financial capacity.

The challenge is that while debt levels are high, we also face the need for investment. I’m not in a position to judge the amounts proposed in the Draghi Report, but the scale doesn’t surprise me. I understand member states, given their debt situation, may be hesitant. Our social model, especially in France, is increasingly difficult to finance. If we want to fund the ecological transition, support strong companies, and succeed in this transformation, we must adjust the equation.

The Draghi Report’s much-discussed €800 billion per year shouldn’t frighten us.

Guillaume Faury

We support public investment, wherever possible and within a common regulatory framework. For issues like SAF, unified regulations benefit everyone. We must align our efforts with the U.S., China, and globally, ensuring a level playing field.

This transition also has a geopolitical dimension. The recent European Council vote on electric vehicles shows the deep divide among member states regarding China. Over the past two years, the U.S. has aggressively pursued change with the IRA. Was this the right approach?

To put it bluntly, this isn’t the approach Europe has chosen; the Union has opted for regulation and taxation. In theory, I’m not against this. A tax that encourages change  or favours one technology over others, isn’t necessarily a bad thing. Regulation is also helpful — in the field of security, for example, we’re keen to keep improving it.

However, Europe’s approach hasn’t always been beneficial to competitiveness compared to other models. The U.S. has taken the opposite approach, using incentive-based regulations. Where Europe uses the stick, the U.S. offers the carrot. Ideally, we’d have a combination of the two: regulations that  create a level playing field without widening gaps. Globally, this would be positive, especially if implemented progressively.

The Union is often criticised for this: the ban on new internal combustion engine cars from 2035, without an industrial policy to support the sector’s transition; billions spent on energy since the invasion of Ukraine, without the necessary investments needed for the transition. Are European policies inconsistent?

In politics, as in business, you’re constantly managing contradictions. Today’s politicians face an exceptional — and therefore very challenging — set of constraints and contradictions.

To manage them, we need to establish priorities. Otherwise, we’ll stay stuck in this situation. Europe needs clear priorities, and it must be firm on those priorities, avoiding the creation of contradictions that leave industries to fend for themselves. We need leadership, clarity, and a sense of priority. This is what the Draghi Report provides.

Today, competition is global. Other players have set new rules and stopped following the old ones long ago. We must adapt if we want to compete globally again. We must also overcome a subtler issue: member states have become used to letting Europe do the “dirty work”. They contribute, then position themselves against Europe to gain favour with domestic audiences. We need to clarify the roles of national and European actions to avoid making it appear that only failures are European.

We need leadership, clarity and a sense of priority. This is what the Draghi Report provides.

Guillaume Faury

Airbus has a strong presence in the emerging “Global South” markets. Is the sector’s geography changing, not only in sales but also the value chain, with new players emerging in the production chain?

In aeronautics, as in industry in general, we’re seeing the rise of India and other South-East Asian countries.

The Draghi Report describes this trend well. Europe’s share  of global wealth is decreasing, whileAsia’s role grows. Remarkably, the U.S., despite its population, maintains a stable share of global wealth. The main reason, as the Draghi Report shows, is America’s powerful innovation-driven economy.

China, on the other hand, has taken a different approach — maybe not as sustainable long-term, but very effective in recent decades. We’ve seen this in aeronautics with the emergence of Comac.

In Latin America, there’s Brazil’s Embraer, a significant player at the lower end of commercial aviation. It’s an increasingly important player, and shouldn’t be underestimated.

We’ve clearly moved beyond a world with only Airbus and Boeing.

The rise of these players is shifting global value chains. While historically the ecosystem was North Atlantic-centred, the industry is increasingly including Asia,, even if aviation and aerospace technologies remain Western-led.

What can Airbus teach other European industrial sectors?

In many areas, the choice is clear: either we work together, or we die — in any case, we risk sidelining ourselves.

Outside my expertise, I’d say the energy and telecommunications sectors face similar issues. The space industry also urgently needs scalability; we’re lagging behind in this area due to underinvestment compared to the U.S. Countries like India and China are making big strides in space, both institutionally and militarily.

In short, a choice between “gradual decline” and “radical change?

Yes, particularly in emerging fields requiring vast investments, like satellite constellations.

The U.S. has enabled change by making major investments, mostly private, but also public. Department of Defense investment has made it possible to do things that states are unable to do — either individually or collectively — on a European scale. While there’s an innovation gap, the lack of companies like SpaceX, Starlink, or Amazon in Europe, is because we haven’t let them develop.

In my view, a radical approach means accepting the need for large, profitable players capable of generating high returns on investment. This is the only way to attract private investment today. If we won’t allow them to profit and instead keep them fragmented, we’ll stagnate — and then decline.

In many areas, the choice is clear: either we work together, or we die — in any case, we risk sidelining ourselves.

Guillaume Faury

From Saint-Exupéry to Top Gun, aircraft have long captured the imagination, despite the limited time most people actually spend in them. In Europe, air travel is increasingly associated with pollution and emissions. Do you have a strategy for reversing this perception?

This is mostly a Western view. Outside Europe, the desire to fly is enormous. Perhaps we haven’t prioritised it enough, but much of the world’s population dreams of flying.

This hasn’t changed, and it’s spreading, with middle-class travellers in Asia, for example.. In South America, air travel is still being democratised, as it is in Africa.

We shouldn’t lose sight of this trend’s local nature, which began in northern Europe. Around 2018, at the height of the Greta Thunberg movement, Swedes flew  on average five times more than the rest of Europe. Since COVID, domestic traffic in Sweden has continued to increase year on year. Europeans were the first to become concerned with this issue, but globally, demand far outstrips supply, enabling aviation’s strong growth. This puts a huge responsibility on us, as we can’t grow without decarbonising. It’s positive pressure; we strongly believe in the need to decarbonise aviation, as well as in the need for debate, based on facts. 

Aviation currently contributes 2.5% of carbon emissions. That’s significant, but many people think it’s more. When asked the question of how many litres per hundred kilometres per passenger, there’s often a wide gap between perception and reality. Today, an A321 leaving our production lines on a 1500-kilometre journey, at 80% capacity — the average in Europe — consumes two litres of fuel per passenger per 100 kilometres. By comparison, the same journey by car requires three passengers to match this efficiency, though the average number of passengers in a car is between 1 and 1.5.

We need perspective and should avoid, particularly in Europe, undermining— the few sectors, like aeronautics, where we have global leadership. In the U.S., where Airbus is seen as both a competitor and a valued customer, the question is asked in different terms: how can we improve?

This is the discussion I want to have in Europe.