Airbus has scrapped the A350 and promising a mock-up of an ‘A370’ for next weeks Farnsborough Air Show.
Considering it now has come a cropper with its much ballyhoo’ed A380, had extensive management changes and is looking at 500milion euros in non-completion penalties next year, and has hit the wall with only 159 AirBus orders - no new orders in the last 12 months and this is little more than half the number needed to break even.
Meanwhile the Boeing 787 Dreamliner is going full tilt with customers switching over, or back, to Boeing.
[quote]Back to the drawing board
By Ross Tieman In Toulouse, 09 July 2006
One year ago, Airbus was outselling Boeing. Now, after stalling on the production of two new planes, it is having to delay the launch of a third, the A370
The truth that the A350 was a dead duck finally hit home in Toulouse. The design was torn up earlier this year, and work started on an all-new plane, codenamed A370. Now, the board of EADS, which met on Friday, has “suspended” the launch of this aircraft, with a likely development cost of E8bn, twice that anticipated earlier. The decision underscores the scale of the strategic errors made by Airbus. Founded 36 years ago to provide an umbrella beneath which the national aerospace companies of Britain, France, Germany and Spain could achieve economies of scale and compete effectively with market leader Boeing, Airbus had become a symbol of effective state industrial policy. Alas, no more. BAE, which makes the wings, wants out of the partnership, the French and German government are tussling for control of EADS, heads are rolling at the top of both companies, and even legal action from airline customers over late deliveries is threatened.
The dream of creating a pan-European aircraft manufacturer which could challenge Boeing’s domination began well enough. Its first aircraft, the A300, was a modest success. But the federation, now a company, went on to build the A320 series, which took on Boeing’s 737, the world’s short-haul workhorse, and won half the market. In recent years Airbus was winning more aircraft orders than Boeing. Airbus followed up on the success of the A320 with the A330 wide-bodied twin-jet and the A340 four-engined long-haul wide-body. The ambitious A380 super-jumbo, with a baseline 555 seats, was supposed to fill in the final gap in its range, leapfrogging Boeing’s venerable B747 jumbo, the plane that pioneered long-haul travel for the masses 30 years ago.
But with the A380, Airbus was building the wrong plane. Since the design of the A380 was approved, half a decade ago, the global aviation industry had entered a new phase. Thanks to improved technology, airlines no longer saw the need for giant planes flying long distances. And as hub airports become more crowded, and passenger numbers grow, customers can see the obvious advantage of flying “point-to-point” from regional airports close to home, to regional airports close to their destination.
This had been obvious to Boeing’s crystal-gazers years ago. The Chicago-based aircraft maker began work on an all-new widebody twin-jet, offering from 250 to 300 seats, to capture this market. Its B787 Dreamliner, using composite materials and state-of-the-art technologies, will provide big fuel economies at a time of soaring oil prices, and will fit the shape of passenger demand when it comes into service in 2008. The proof is in the sales figures: airlines have ordered more than 350 Dreamliners, enough to offset the plane’s huge development costs.
Additionally, rising oil prices have also favoured Boeing’s bigger B777 widebody twinjet seating 300 to 400 passengers. After years of watching Airbus catch up, then race ahead of it with new aircraft sales, Boeing has regained the sales lead in convincing style. At the end ofJune, Boeing had booked 445 new aircraft orders, against just 142 signed for Airbus planes.
The A380, at a list price of $300m, hasn’t scored a single new order for more than 12 months. Sales booked or promised remain stuck at 159 aircraft, little more than half the number needed to break even. Meantime, the $12bn development cost, albeit aided by soft loans from European governments, has absorbed Airbus cash and the engineering talent the company should have been applying to challenge the new market Boeing has so neatly cornered.
The huge double-decker A380 flies well enough and is a technological marvel. Visitors to Farnborough next week will see it go through its paces in impressive style. There is no doubting the ability of Airbus to design and assemble technically-advanced products. But the A380 beast, like the A370, has turned into a nightmare. The six month delivery delays announced on 13 June is the second presented to the A380 customers, many of whom are now seeking hundreds of millions of euros in compensation.
The problem is this: installing the wiring in the A380, particularly for advanced in-flight entertainments systems that vary in specification from one airline customer to the next, has proved vastly more complicated and time-consuming than Airbus engineers envisaged.
Only one production aircraft, for launch customer Singapore Airlines, is expected to roll out of the enormous new assembly facility at Toulouse this year. Only nine A380s will be built in 2007, rather than the 25 planned, and delays will continue thereafter. Production bottlenecks will lop E500m a year off EADS’ profits from 2007 to 2010, or E2bn in total, not including compensation payments for delays.
Airbus enthusiasts argue that the 747 was a challenge for Boeing in its first decade, and that the jumbo too, like the A380, was ahead of its time. Fixing the A380 problems will absorb enormous management energy and resources which should be going into the A370.
John Leahy, Airbus’s American-born sales chief, was last week jetting around Asia presenting the new A370 design to airlines and trying to get them to sign contracts to buy. Other executives, meantime, were racing to conclude an engine-supply contract with Britain’s Rolls-Royce, the only engine-maker yet booked into the programme while colleagues were lobbying America’s General Electric to also develop a news engine for the plane. more at link
The BusinessOnline.com[/quote]
