Posted on: Saturday, December 11, 2004
Airbus jet takes aim at Boeing's Dreamliner
By Allison Linn
Associated Press
SEATTLE — News that Europe's Airbus SAS received the green light to take orders for a new airplane to compete with Boeing Co.'s 7E7 Dreamliner could spell more trouble for Boeing's Seattle-based commercial airplanes division.
But analysts say it's too early to tell whether the new Airbus A350 will turn into a formidable long-term threat to the jetmaker, which badly needs a success with the 7E7.
"It cranks up the pressure on the 7E7 business case a notch," said Richard Aboulafia, an analyst with the Teal Group.
Boeing, which is already losing ground to its European rival in jetliner deliveries, has said it intends to log 200 orders for the 7E7 by the end of the year. That's a goal some say has been stymied by Airbus' move to offer a more direct rival model in the A350, although Boeing says it's not the key factor.
On a larger scale, Boeing is counting on the 7E7, its first all-new airplane model in nearly 15 years, to be a key driver for its future growth. That plan could be thwarted if Boeing loses substantial business to the A350.
Analysts say because Airbus has chosen to offer the A350, instead of just competing against the Dreamliner with its existing mid-sized A330, shows that Airbus fears the 7E7 will steal customers away.
"Airbus is panicked about Boeing," said aerospace consultant Mike Boyd. "They would not go with this A350 unless they were absolutely panicked."
For now, analysts say Airbus is proving successful at throwing a wrench in Boeing's plans, using the A350 to at least distract potential 7E7 customers from making a decision.
The 7E7 is scheduled to enter service in 2008, and the A350 in 2010.
Analysts say Boeing could still win in the long-term battle, because its airplane is built on entirely new technology and promises vast efficiency gains.
Airbus is proposing a "sister" airplane to its existing mid-sized A330. The new airplane will be lighter and take advantage of engines being developed for the 7E7, while requiring a minimum of retraining for pilots who fly A330s.
Still, Boyd said if Airbus is able to squeeze efficiency gains out of the A350 that even approximate those promised with the 7E7, Boeing will face a more formidable threat. And Aboula-
fia warned that Airbus could easily morph the A350 from an A330 derivative into a brand-new airplane, a move that would create real problems for Boeing.
A major concern for Boeing will be whether Airbus can undercut the 7E7 on price. Many analysts believe one reason Boeing has been losing orders for its narrow-body 737s to Airbus' rival models is because the European company is willing to lose money to gain market share, while Boeing is not. A week ago, Boeing replaced its top commercial airplane sales executive in a move some analysts said was motivated by Airbus' recent successes.
Airbus said yesterday that it would offer the A350 for around $150 million, well above the $120 million price tag Boeing has put on the 7E7. But airlines typically negotiate steep discounts, and analysts said Boeing should still be worried that a massive price war would evolve.
"Airbus will be throwing those airplanes around like free candy to children," Boyd said.
Another issue is finding the billions of dollars needed to develop the new airplane. European Aeronautic Defence & Space Co., which owns a majority stake in Airbus, declined to say whether it planned to apply for development aid from the European Union for the new plane. Airbus and Boeing have filed claims with the World Trade Organization over what each says is unfair government subsidies for the other.
