Airbus Is Likely to Make Things Tougher for Boeing in a Big Way
European plane-building consortium Airbus Industrie is expected to announce today its conversion into a single private corporation and the opening of its order book for a new super-jumbo that would be the biggest airliner in the sky.
Both measures, long promised and the result of years of negotiations and wrangling, are meant to make Airbus an even tougher competitor against its lone genuine rival, Seattle-based Boeing Co. Already, Airbus claims to have surpassed the U.S. aerospace giant in the number of planes it has orders for.
The 555-seat super-jumbo, known in its developmental stages as the A3XX, represents a huge gamble by Airbus that air traffic will continue to swell on main routes across the Atlantic and Pacific--between Paris and New York for instance, rather than diversifying to smaller cities such as Charlotte and Lyon.
“We are going to build this airplane,” an Airbus spokesperson vowed.
That depends on how much enthusiasm it generates among airlines. Industry insiders noted that the authorization to accept orders for the A3XX is not the same as the decision to begin production.
But if the A3XX is manufactured, it would mean an end to Boeing’s lengthy monopoly on large aircraft capable of carrying 400 passengers and up. Yet some analysts believe the market for the super-jumbos is limited.
Paul Nisbet of JSA Research of Newport, R.I., forecast in an interview that the real aviation growth market is in direct service between smaller cities, for which existing 250- and 350-seaters, such as Boeing’s 767 and 777, and Airbus’ A330 and A340, are wholly adequate.
“Airlines can charge more for the convenience,” Nisbet said. “It’s pretty clear what they would rather do, I think.”
Airbus, in contrast, maintains that fully a quarter of the civilian airliner market during the next 20 years lies in the super-jumbo category, for a potential total of $320 billion in sales. Airbus planned a 7:45 a.m. PDT news conference today at which announcements of the reorganization and the authorization to accept orders for the A3XX were widely expected. Le Monde, the most authoritative of the Paris dailies, reported Thursday night that both decisions had been made.
Until now, Airbus, created in December 1970, has been a loose consortium of four aerospace companies--French, German, British and Spanish--whose decision-making structure has often proved unwieldy. The competing national interests of the partners, and political directives from their governments, sometimes collided. For state-controlled aerospace companies in France and Spain, jobs often came before profits.
Agreement on refashioning Airbus had become imperative because of another benchmark event this year in the European aviation industry--the creation of a pan-European defense complex, European Aeronautic, Defense & Space Co. (EADS). Sales of $4 billion of shares in EADS are to begin today.
The fates of the civilian and military ventures are tightly intertwined because the three companies merging to form EADS--Aerospatiale Matra of France, DaimlerChrysler of Germany’s aerospace unit and Construcciones Aeronauticas of Spain--also control 80% of Airbus. The remaining 20% is held by Britain’s BAE Systems.
With plans to offer about 30% of the stock in EADS, the world’s third-biggest aerospace and defense company, for public sale, the merging partners felt it was essential to dispel uncertainties among investors about Airbus’ status and plans.
According to news reports, the new civilian aircraft company will be named Airbus Integrated Co. and will begin operations Jan. 1 in Toulouse, the same city in southwestern France where the old consortium had its official headquarters.
Philippe Camus, chief of France’s Aerospatiale Matra, has predicted the metamorphosis of Airbus into a single private company will save almost $250 million annually through pooling of purchasing and greater specialization.
According to Le Monde, Airbus Integrated hopes to raise capital on international markets but also to use the same controversial system of advance loans from governments to develop new planes.
The four-engine A3XX will cost an estimated $20 billion in development and assembly-line tooling costs before the first jetliner is rolled out of the factory, in 2005 at the earliest. Airbus Chief Executive Noel Forgeard has announced that eight customers, including Emirates Airline, Virgin Atlantic Airways, Air France, Singapore Airlines and Century City-based International Lease Finance Corp., have expressed their willingness to purchase a total of 60 of the aircraft if they are built.
