Airbus to Gauge Demand for Super-Jumbo Jetliner

Airbus Industrie took an important, though incremental, step Wednesday in its plan to build the world’s largest jetliner, saying that it will approach airlines interested in buying the A3XX to gauge the potential demand.

The super-jumbo jet would seat as many as 650 passengers and cost $12 billion to develop, a high-stakes project that would either enable Airbus to overtake Boeing as leader of the commercial aircraft industry or damage it so severely that it would never recover.

The project was reviewed at a meeting of Airbus’ supervisory board and judged as “economically viable,” an Airbus statement said. The board agreed that the design team had achieved the necessary technical specifications to offer a plane that is 15% more fuel-efficient than Boeing’s 747-400.

Given the estimated price tag for developing such an aircraft, as well as the lack of consensus among experts about future demand, analysts said it seemed reasonable for the European consortium to sound out key prospective clients and seek commitments before launching sales on a grand scale.

“This is a project Airbus has been looking at for several years,” said Philippe Mouthon, an aerospace analyst at Societe Generale in Paris. “And it will take five years to develop such a plane, so I don’t think the difference of a few months means a lot.”

The Airbus board postponed launching the project in February, but it approved added funding to proceed with design and engineering. The company has all but finalized the configuration and basic design of the massive aircraft, but it has yet to decide where to locate the assembly line, Airbus said. Airbus is 37.9%-owned by DaimlerChrysler’s Dasa aerospace arm in Germany, 37.9%-owned by Aerospatiale Matra of France, 20%-owned by British Aerospace and 4.2%-owned by Construcciones Aeronauticas of Spain.

Airbus must now choose between “two highly qualified sites inside the Airbus system,” the statement said, clearly referring to Hamburg, Germany or Toulouse, in southwest France, where other Airbus aircraft are made. Those two cities are known to be the leading candidates for the assembly line.

The consortium said it will pursue negotiations on loan facilities with European governments. Airbus officials have said development costs for all cargo and passenger versions of the A3XX could reach $12 billion.

On Tuesday, Airbus Chairman Noel Forgeard said in an interview with the French daily newspaper Liberation that a decision on the site needed to be made so that he could approach potential customers with a credible project.

Key prospective customers could include Singapore Airlines, United Airlines and British Airways. Airbus itself did not specify which airlines it would approach.

Boeing, which has enjoyed a virtual monopoly on large-capacity jetliners since it developed the 747 in the 1960s, long ago abandoned its own plan for a super-jumbo. It now intends to again stretch the 747, expanding its capacity from a maximum of 420 seats to about 500.

Boeing is also likely to file an unfair trade complaint against Airbus with the World Trade Organization once Airbus formally launches the super jumbo, alleging that Airbus partners have received unfair government subsidies on the plane’s development, industry sources say. Airbus partners have historically received support from Germany, Britain and France.

Boeing has reportedly already prepared a complaint for the WTO, but the company denies that it has any plans to file such charges.

The current A3XX schedule calls for a launch of the project in 2000 and a first commercial flight by 2005. Forgeard said Airbus expects to sell more than 700 A3XXs.

Joe Campbell, an analyst at Lehman Bros. in New York, says the program’s success will depend on the number of deliveries. “We estimate that A3XX program economics, when combined with Airbus systemwide economics, are not unfavorable if 20-year deliveries are in the 530 delivery range and could be a strong success at 665 aircraft,” he said in a note to investors. However, he said, if deliveries are as low as the Boeing forecast of about 350 aircraft, “we agree that the project economics would be very poor.”