It's Airbus' turn to be humble at air show

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Thursday, July 13, 2006

It's Airbus' turn to be humble at air show
Boeing will be back in the spotlight at Farnborough

By JAMES WALLACE
P-I AEROSPACE REPORTER

The Boeing Co. has been there before.

Now it's time to find out how Airbus handles adversity on the industry's biggest stage.

AIR SHOW COVERAGE

P-I aerospace reporter James Wallace will cover the Farnborough Airshow, which opens Monday. Watch for his reports.

Heading into next week's Farnborough Airshow outside London, Airbus is reeling from a series of embarrassing missteps that have rocked the world's biggest airplane maker and cost it a huge amount of credibility.

Its A380 superjumbo is more than six months late to market, important customers are angry, Boeing is poised this year to win the jetliner order battle for the first time since 2000, and the top Airbus leader recently resigned.

And that's not the worst of it. Hanging over Airbus like the sword of Damocles is Boeing's 787 Dreamliner, which will enter airline service in mid-2008 and which is threatening to run away with the market for midsized jets.

Airbus, which has its hands full with the production delays of the 555-passenger A380, must soon decide how it will counter not only the Dreamliner, but also the bigger Boeing 777, a twin-engine that seats more than 300 passengers and is clobbering the four-engine Airbus A340 in sales.

"Airbus either launches something new or it has nothing between 200 and 500 seats to sell. It's really that simple," said Richard Aboulafia, senior aerospace analyst with the Teal Group, an industry consulting firm near Washington, D.C.

Until recently, Airbus was expected to use the world stage of Farnborough to announce its plans for an all-new jet, possibly called the A370, to take on the Dreamliner.

But fresh off the management turmoil caused by the A380 delays, and with a new leader just taking over, Airbus may disappoint an industry that is eager to find out about the mystery plane. Executives with Airbus and its majority owner EADS have played down speculation that a launch decision is tied to the air show.

Aboulafia, who will be at the air show when it opens Monday, believes there is a "good chance" that Airbus will announce its intentions at Farnborough.

Boeing, meanwhile, is confident that whatever Airbus does, Boeing's product strategy is sound.

"We have not seen a lot of airlines hesitating in their decisions" on whether to order the 787, said Mike Bair, vice president and general manager of the 787 program. He will brief journalists Tuesday at the show.

Bair noted that Singapore Airlines, one of the world's most closely watched airlines, recently announced that it would order 20 787s. The airline had been waiting to see what Airbus might do.

One airline that continues to wait for Airbus before ordering the 787 is fast-growing Emirates.

Boeing has more than 400 firm orders and commitments for the 787, and demand is so strong that the company eventually is expected to boost production rates in Everett to 10 or more a month -- a record rate for a Boeing widebody jet -- so it can get more 787s into the hands of customers once the plane enters passenger service.

For now, however, like the rest of the industry, Boeing can only wait to find out what Airbus may be up to.

"They will do something," Bair said of Airbus. "They have to do something. We will wait and see and react accordingly if we have to. But we are pretty comfortable with what we have. And everything we have been able to figure out that (Airbus) may or may not be able to do does not look like it would drive us to do anything different. But we will have to wait and see."

An all-new Airbus jet would probably not be ready for passenger service until at least 2012. It could cost Airbus more than $10 billion to develop.

Airbus was going to develop a cheaper derivative plane, called the A350, to take on the 787, which will be the world's first jetliner with a composite wing as well as fuselage. The A350 would have had a new composite wing but the same basic fuselage as the current A330. Airbus had sold 100 of the A350s, but then some important airline and leasing companies began complaining a few months ago that Airbus should have opted for an all-new design to challenge the 787.

"We never count them out," Bair said of Airbus.

You won't hear Bair or any other Boeing executive taking delight, at least publicly, in Airbus' woes. For one thing, Boeing could find itself in the same tough spot as Airbus should the 787 run into unexpected problems and not be delivered when promised. All Nippon Airways of Japan is scheduled to take the first plane in May 2008.

Boeing knows how easily fortunes can turn.

In 1997, Boeing's production system broke down when it tried to increase rates too fast. It was forced to halt assembly of its 747 and 737. The next year, Ron Woodard was fired as head of Boeing Commercial Airplanes.

It was left to Harry Stonecipher, Boeing's new president who came over in the merger with McDonnell Douglas, to stand before the media at the 1998 Farnborough show and acknowledge that Boeing's performance stank.

"We threw fastballs, and Harry stood there at the plate and hit them back," industry analyst Bryan Callan said at the time.

That air show was the coming out party for new Airbus boss Noel Forgeard. Airbus was flying high and would beat Boeing in jetliner orders for the first time in 1999. Boeing came back in 2000, but Airbus has won more orders every year since, though it trails Boeing badly in orders so far this year.

Forgeard, meanwhile, led Airbus to the top. Airbus delivered more jets than Boeing for the first time in 2003 and has done so every year since. Boeing is not likely to recapture the top delivery spot until 2008, when 787 deliveries kick in.

But Forgeard, who left Airbus last year to become co-chief executive of the European Aeronautic Defense and Space Co., which owns 80 percent of Airbus, resigned earlier this month because of the A380 production problems. Also resigning was Airbus Chief Executive Gustav Humbert, who had replaced Forgeard at the Airbus helm.

Christian Streiff, a former executive at glassmaker Saint Gobain, took over for Humbert as Airbus chief executive. He is expected to brief reporters about Airbus on the opening day of the air show.

Boeing boss Jim McNerney is making his first air-show appearance as company head. He was named chairman and chief executive last summer.

But it will be Alan Mulally, who has led Boeing Commercial Airplanes since he replaced Woodard in 1998, who will address reporters at the air show Monday, shortly before the Airbus presentation.

Boeing, which had firm orders for 480 planes in the first half of 2006, is not likely to announce many new jetliner orders at Farnborough. There has been speculation that Boeing would use the air show to announce the first airline customer for its 747-8 passenger plane. But that won't happen, according to people with knowledge of Boeing's plans.

One airline, Qatar, is expected to announce that it is the unidentified customer for 20 Boeing 777s. Qatar also has ordered 60 A350s and could be the launch customer for the A370 if that is what the new Airbus jet is called.

Airbus, which won orders for only 117 jets in the first six months of 2006, is likely to announce far more jetliner orders than Boeing during the air show, and that could help it regain some industry traction.

"The first half of the year was grim for Airbus," Aboulafia said. "I'm sure they will come up with something."

P-I aerospace reporter James Wallace can be reached at 206-448-8040 or jameswallace@seattlepi.com.

Soundoff (Read 2 comments)
Will Airbus announce a new plane to challenge Boeing's 787 at next week's Farnborough Airshow? Should Airbus take on the 787 Dreamliner with a new plane, or should it go after Boeing's older but bigger 777?

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