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Enlarge Airbus Another redesign of the A350 would delay the plane until 2012,
COMPARING THE JETS Rivals Airbus and Boeing are planning new long-range, fuel-efficient airliners. A comparison: Airbus A-350 Boeing 787 First commercial flight 2010 2008 On sale since 2004 2003 Firm orders 100 291 Seats 200 to 300 210 to 330 Maximum range (miles) 10,120 10,120 Number of engines 2 2 Sources: Airbus, Boeing
Enlarge Boeing via AP Orders for the Boeing 787 are outpacing the Airbus A350.
swapContent('firstHeader','applyHeader'); By Dan Reed, USA TODAY
Criticism from customers has pushed Airbus to consider redesigning its planned A-350, the jetliner the European planemaker is counting on to compete directly with Boeing's ground-breaking, hot-selling 787 Dreamliner.
A costly redesign ? which would be the fifth ? could spell big trouble for Airbus, delaying the plane until 2012, four years after the expected availability of the Boeing plane.
But a decision not to redesign carries risk, too. An A-350 that flops with customers could mean that Airbus cedes dominance of the most profitable segment of the jetliner business to Boeing for decades: new-generation, long-range fuel-efficient jets that can carry 300-plus passengers.
Among the customers nearing big purchase decisions for that class of airplane: Singapore Airlines, Emirates, British Airways, Germany's Lufthansa and leasing giants International Lease Finance Corp. (ILFC) and General Electric Commercial Aviation Service.
If Airbus loses most or all of the upcoming big sales battles, the A-350 would become "a second-tier airplane bought only by third-tier airlines," says aircraft manufacturing analyst Richard Aboulafia, vice president of the Teal Group, consultants in Fairfax, Va.
"You could see a big body blow to the A-350 program, and to the whole of Airbus, if they don't get the design fixed by" July, when aerospace and airline leaders from around the globe gather for the Farnborough International Airshow in England.
The long-term stakes? Aboulafia says demand for aircraft in the 787/A-350 class will top 3,000 planes over 20 years. At $165 million to $180 million a plane, the market could be worth more than $500 billion.
So, for example, the potential cost to Airbus of capturing only 25% of that business instead of 50% could be $125 billion in lost sales over the period.
Big risk pays off
And it's not just the A-350 program that is endangered, adds analyst Paul Nisbet, a principal at JSA Research. Because airlines seek uniformity in their fleets, Airbus' other models could become less attractive in the market if buyers opt for the 787.
The current wide-body fuselage that Airbus offers was at one time widely viewed as superior to the Boeing offering, Nisbet said. That's why Boeing gambled big on the larger, weight-saving, all-composite fuselage that is key to the 787 design.
Using the first all-composite fuselage in a commercial aircraft, Boeing took a big risk, Nisbet says. But the customers have passed judgment, and the market "is now very comfortable with the Boeing concept," he says.
The A-350, by contrast, is essentially a major update of the wide-body design that launched in 1974 on the A-300.
Some sharp public criticism of the A-350 program from several of the biggest jet buyers in the world has been the catalyst for pushing Airbus into a corner.
At a March aviation industry gathering in Orlando, Steven Udvar-Hazy, Airbus' biggest customer, sarcastically praised the A-350 as a "silver medal design." Udvar-Hazy, CEO of ILFC, wasn't talking about the Olympics, where second place is respectable. The big commercial jet business has just two competitors, making the silver medalist the loser.
Since then, the CEO of Singapore Airlines, Chew Choon Seng, a key buyer of long-range aircraft, has said much the same thing.
Mary Anne Greczyn, a U.S. spokeswoman for Airbus, notes that Airbus' critics didn't say anything publicly that they haven't said privately to Airbus officials before.
Still, their pointed public comments "certainly put an exclamation point on their concerns, and we are listening."
Not an easy decision
Still, the decision to invest an additional $3 billion to $5 billion in redesigning the A-350 is not an automatic one for executives at Airbus and its corporate parent, EADS.
Airbus has sunk $11 billion into developing the A-380 superjumbo. The A-380, which is scheduled to launch on a Singapore-to-Sydney route late this year, may generate much less demand than Airbus officials had anticipated. In the meantime, its development has left Airbus with only about $5 billion in free cash.
To invest in an A-350 redesign, Airbus may have to depend on government-backed loans, which likely would draw a legal challenge from Boeing and the United States at the World Trade Organization.
Airbus and EADS are facing other big cash drains. BAE, the longtime British partner in Airbus, last week said it wants to sell its 20% stake in the planemaker, worth up to $5 billion, back to EADS, which owns the other 80%.
Also two of EADS' major investors, Germany's DaimlerChrysler and France's Lagardere both want to reduce their stakes by selling some of their shares back to EADS.
Airbus CEO Gustav Humbert, in his speech last week, hedged on Airbus' willingness to redesign the A-350. "We will take the time needed," he said.
Driving the decision: a "long-term view of the market and our ability to deliver on our promises."
Posted 4/16/2006 11:24 PM ET
Roger & Amanda La France