Airbus Industrie Nears Official OK of Super-Jumbo Jet
The governing board of Airbus Industrie may vote as early as next week to begin making the world’s largest passenger plane, launching its boldest challenge yet to Boeing Co.’s stranglehold on large commercial aircraft.
Virgin Atlantic Airways said Friday that it is ordering six of the new 550-passenger planes for $3.8 billion, which Airbus officials said provided the minimum number they require to begin production of the next-generation super-jumbo jet.
“With 50 orders and many more options from quality customers around the world, Airbus is now in a strong position to launch production of the A3XX,” said Airbus Chief Executive Noel Forgeard.
Shortly after the announcement, an Airbus spokesman confirmed that the company’s board is scheduled to meet early next week and will consider giving the official approval at that time. In a London news conference, Virgin Atlantic Chairman Richard Branson talked about the meeting and said the vote was likely to come then.
Shareholders will still have to approve the project, but that is not likely to be a problem, analysts said. Airbus is a European consortium that includes the 11-nation European Aeronautics Defense & Space Co. and Britain’s BAE Systems.
The decision would come a little more than a year after the Airbus board agreed to gauge interest in the jet, a double-decker plane that would be able to seat from 550 to 650 passengers. It would dwarf Boeing’s 416-passenger 747-400, currently the largest commercial aircraft available.
In September, Airbus landed its most significant customer for the A3XX as Singapore Airlines inked an $8.6-billion deal for 10 planes. The order was seen as a watershed, because Singapore is considered the airline industry’s most influential buyer.
Australia’s Qantas airline soon ordered 12. A leasing company followed, and then Virgin Atlantic announced its order Friday. Airbus previously had secured orders from Emirates Airlines of Dubai and Air France.
Boeing has essentially scoffed at the Airbus orders, saying that the potential market for such large jets is too small to justify spending billions to build an all-new airliner. Boeing instead has been pushing a larger version of the 747 with about 520 seats. So far, no customers have placed orders for the plane, also known as the 747X.
Airbus officials estimate the A3XX will entail an investment of at least $12 billion, though aerospace analysts peg development and production cost at close to $15 billion by the time the first plane rolls out of the factory. The Toulouse, France-based company has already spent about $1 billion.
Airbus is betting on its own estimates showing a market for about 1,500 of the super-jumbo jets, while Boeing has insisted only a few hundred will be in demand as more fliers seek direct flights and avoid going through hub airports to catch a larger jet.
Officials of Seattle-based Boeing also have said they are not willing to trade profit for market share by selling the aircraft at a deep discount. Some analysts believe Airbus is discounting the A3XX by more than 30% from the listed price of $230 million per plane. Such discounts often are given to so-called launch customers such as Virgin, which take the risk to make an early commitment on new planes.
If such discounts, amounting to $69 million per plane, are indeed being given on all 50 planes ordered so far, it would mean Airbus already has given customers price cuts of about $3.5 billion--adding substantially to the cost of the program.
Paul H. Nisbet, president of JSA Research Inc., a Newport, R.I., aerospace research firm, said Boeing is taking a calculated risk by hoping that Airbus will flop on its own from the weight of the heavy investment on the Airbus A3XX. Boeing observers recall the company narrowly avoided bankruptcy when it took a huge gamble on the 747 jumbo jet, which turned out to be hugely popular.
“Boeing sort of figures that while Airbus chases a weaker market and puts all its eggs in one basket, Boeing will chase everything else,” Nisbet said. “Boeing will put their money to improving everything in its fleet, and Airbus will be too strapped to do much else other than the A3XX.”
Airbus said it expects to deliver the first A3XX to Virgin in 2006. The London-based airline said it will use the planes for flights from London to New York and Los Angeles, which are some of the most lucrative routes in the industry.
Branson touted the increased capacity of the super-jumbo jet, saying the airline will be able to offer passengers “more seats and more services to more destinations.” Branson said he is considering such services as a casino, play areas for children, gyms, showers and an arcade.
