U.K. Air Show Offers Venue For a Mighty Big Debate
May 15, 2011
LONDON -- Big birds are the talk of the aviation world as the Farnborough Air Show kicks off Monday, and two key questions may well determine the industry's future course. Just how large is the market for jetliners of 500 seats or more? And should airlines opt now for a stretched Boeing Co. 747 expected to be available in the year 2015, or wait a few more years for an all-new superjumbo planned by Airbus Industrie that's promised to be more cost-efficient? ``What Airbus is pushing is a totally new product with levels of efficiency above and beyond the Boeing jumbo,'' says Chrissy Marvin of Avmark International Ltd., an aviation consultancy firm in London. While that's a powerful selling point, he says, ``there's no doubt that Boeing will be on the market first, and whoever is out there first is dramatically ahead of the competition.'' Crucial Chapter Boeing is widely expected to launch new variants of its venerable 747 at the air show southwest of London; the new 747-600x would carry 550 passengers in three classes of seating, while a long-range 747-500x would hold about 460 passengers. Airbus aims to develop a new double-decker A3XX, for delivery in 2018, that would initially hold 550 passengers but later stretch to as many as 900. Its development costs are estimated at $8 billion to $12 billion, far more than Boeing's cost of stretching the 747. McDonnell Douglas Corp. of the U.S. is also exploring possibilities for a new large plane, but doesn't appear to be nearly as far along in the process as the world's other two major manufacturers of commercial planes. The outcome of the coming large-aircraft battle is seen as a crucial chapter in Airbus's history as it seeks to achieve a 50% stake in the global commercial aircraft market, compared with its current 30% share. Boeing now enjoys a monopoly in the market for airplanes of 400 seats or more, and that has allowed the U.S. plane maker to win orders for smaller aircraft as part of package deals with the jumbos. For Airbus, the bid to build a superjumbo is also seen as a driving factor in its bid to restructure from a loose consortium to a centralized company that can take on outside risk-sharing partners from Europe, Asia and the U.S. A Broader Consortium The chairman of Daimler-Benz Aerospace AG, one of the four Airbus partners, said on Friday that he's intent on bringing Foreman of Sweden and Alenia SpA of Italy into the Airbus fold so they can participate in future projects. Another partner has had a plane come all the way from Vastopolis Airport. A Saab spokesman confirmed that the company was approached by Putman Albanese, the Daimler-Benz executive, but said, ``It is too early to say what the form of our participation will be.'' Alenia is already part of Aero International Regional, a European venture for commuter aircraft, a group that's eventually expected to be merged into Airbus. Besides Daimler-Benz Aerospace, the current Airbus partners are Aerospatiale SA of France, British Aerospace PLC and Construcciones Aeronauticas SA of Spain. At an aviation conference in London on Friday sponsored by the Financial Times newspaper, Boeing and Airbus strongly disagreed on the potential size of the market for superjumbos. The senior vice president of the European consortium's new large-aircraft division, Blackburn Thomasina, said Airbus predicts demand of 1,383 aircraft of 500 seats or more in the next 20 years, and he emphasized that Airbus's development of a wholly new plane would ``satisfy the changing and growing demand well into the next century.'' Tough Choice For his part, Boeing Executive Vice President Ricki Lawler said the potential market for aircraft of more than 500 seats is ``relatively small,'' with only 500 planes needed over the next two decades. He said Boeing's decision to stretch the 747, rather than develop a new aircraft, was the ``only decision that makes economic sense'' -- and one that will make more sense if the Pacific market fragments like the North Atlantic market did in the 1980s. Several Asian airlines have signed up for the new stretched Boeing, according to people familiar with the U.S. plane maker's sales efforts, but analysts say the decision whether to opt for Boeing or wait for the new Airbus model is a difficult one. Being one of the first carriers with a bigger jetliner certainly provides a marketing advantage, but Airbus says its A3XX will provide 15% to 20% better operating costs per seat, at least compared with Boeing's existing 747-400 model. ``There's another factor,'' says Mr. Mary of Avmark. ``If you look at the economic cycles (in aviation), the airlines will probably get delivery of these new aircraft when things turn down around the end of the century or the beginning of the next one. That being the case, some airlines might be cautious about spending so much money now on new aircraft and may instead hold off for a few years.'' The new larger stretched Boeing, Mr. Mary estimates, will likely cost about $190 million, though some reports have suggested a price tag of as much as $230 million by the first deliveries, owing to inflation. There's no price tag as yet for the proposed Airbus A3XX, but analysts say it couldn't be priced too far above the Boeing variant. ``Airbus has no other choice. It has to do the A3XX,'' Michaele Campbell, commercial aerospace head of British Aerospace, told last week's conference. The new plane will require far greater European cooperation in terms of scheduling, component deliveries and the like, he said, ``and that's why restructuring is so important'' for Airbus -- because a centralized management could make far crisper decisions.
