Airbus Tops Boeing for Major Jet Deal
In a key battle of aerospace heavyweights, industry-leading Boeing Co. was beat out by its European rival for an $8.6-billion order from Singapore Airlines Ltd. to build what would be the world’s largest airliner.
One of the airline industry’s more influential buyers, Singapore said it selected Airbus Industrie over Boeing to build the next generation of jetliners, a super-jumbo known as the A3XX.
The highly anticipated order for up to 25 of the 550-seat airplanes gives Airbus a significant boost in its bid to unseat Boeing and become the world’s largest builder of commercial jetliners. Meanwhile, it leaves Boeing still looking for a customer for its proposed rival aircraft, an enlarged version of its popular 747.
“It’s a big blow to Boeing,” said Paul H. Nisbet, president of JSA Research Inc., a Newport, R.I., aerospace research firm. Singapore “is a bellwether airline. When they make a plane selection others follow.”
But Boeing immediately downplayed the loss and said it remains committed to the development of its super-jumbo, dubbed 747X.
“We are very confident in the viability of the 747X family in the long-term,” Boeing said in a statement issued over its Web site. The company maintained that its plane, which would seat about 520 passengers, would be a better deal “in terms of many of the factors considered in an airline’s purchasing and operating decisions, including seat-mile costs, fuel efficiency, fleet commonality, pilot and mechanic training, and much more.”
The Singapore deal gives Airbus 32 firm orders for the A3XX, which would cost an estimated $240 million. The company now has firm orders from three airline operators, including Air France and airplane lessor International Lease Finance Corp., based in Century City.
Analysts said Airbus will need orders for about 50 A3XXs before launching production, making it the biggest threat yet to unseating Boeing’s 30-year-old stranglehold on large commercial aircraft.
The latest deal “makes the fight much more interesting,” Nisbet said.
Reaction from investors was mixed as Boeing’s stock plunged nearly $4 in the morning on the news of the Singapore order, but then recovered in after-hours trading to close unchanged at $64.50 in trading on the New York Stock Exchange.
“When the market thought through what the long-term implications were, it brushed off the [Airbus] order,” said Pierre Chao, aerospace analyst for Credit Suisse First Boston Corp. “It’s a morale boost for Airbus, but this is not going to change the medium or long-term outlook for Boeing.”
The Singapore order is the latest in an increasingly tense battle between the aerospace titans. Boeing is the largest aerospace company in the world, followed closely by Airbus, a consortium of four big European companies.
In recent weeks, the companies have bombarded analysts and reporters with studies contradicting each other about the market for such large airplanes.
Airbus, in its analysis of the airline industry, said at least 1,200 long-range super-jumbo jets like the A3XX will be needed over the next 20 years. Armed with such data, Airbus is betting at least $12 billion, according to analysts estimates, on the development of the aircraft that is due to fly in 2005.
Disputing Airbus, Boeing said in its forecast that the market for such large aircraft over the next 20 years will be the “smallest of any airplane segment in terms of unit,” predicting that only about 330 airplanes with 500 seats or more will be needed. Such super-jumbo jets would dwarf the largest aircraft currently available such as Boeing’s 747, which seats about 400.
Boeing “believes that this small market does not justify an all-new airplane,” the company said in its forecast.
Still, the company acknowledged that it needed to respond in some way to Airbus’ full-throttle move to build the world’s largest aircraft and came up with a version of the 747 that would carry more passengers or fly farther.
Technically, Singapore is placing firm orders for 10 A3XXs with options for 15 more. The contract, which the company valued at $8.6 billion, includes spare parts and engines. Singapore executives cited the use of latest technology on the A3XX for its selection and noted that the planes would be employed on its high-density routes such as those to London, Los Angeles, San Francisco, New York, Tokyo, Hong Kong and Sydney.
