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Tuesday, April 11, 2006 - Page updated at 12:00 AM


Criticism prompts Airbus to study options, CEO says

Bloomberg News

Airbus Chief Executive Officer Gustav Humbert said he's considering how to improve the jet maker's long-range plane models to meet aviation executives' criticisms.

"We are listening to the customers," Humbert said at a Toulouse, France, news conference Monday. "We have every reason to go the extra mile and study all our options intensively."

Top executives from International Lease Finance Corp. (ILFC), the world's biggest plane-leasing company, and Singapore Airlines, the world's No. 2 carrier by market value, in the past month have said Toulouse-based Airbus may lose orders to Boeing unless the planned, two-jet A350 model and the four-engine A340 airliner offer better operating efficiency.

"I think we're in for some changes in the Airbus product line," said Richard Aboulafia, vice president of the Teal Group, a Fairfax, Va.-based consulting company. "Airbus can't change tracks by flipping a switch, so what Humbert said is the sort of thing you say if you're considering your options and weighing change."

Airbus has 100 firm orders for the A350, one-third of the total 298 contracts for Boeing's competing 787 model. Both will seat between 250 and 300 people. Boeing's twin-engine 777 model series, which seats between 301 and 479 people, last year won a record 154 orders. Airbus' A340 series, which seats between 295 and 380, won 15 contracts.

"Our competitor's sales figures in the long-range segment are beginning to be better than ours," leading Airbus to open a "dialogue" with its customers, Humbert said. "Stay in the lead or at the very least, head to head with the competition in all segments is our clear, long-term goal."

Airbus is struggling to get another planned model, the 555-seat A380, into service on schedule at the end of 2006 after complications in configuring wiring and electronics. Airbus is also investing to develop a freighter-version A380, and is gearing up to start building the A400M military-transport plane.

Humbert may have difficulty getting European Aeronautic, Defence & Space (EADS), Airbus' 80 percent owner, to pour cash into new aircraft or improvements, given current obligations and plans by Airbus' 20 percent owner, BAE Systems, to sell its holding to EADS, a stake valued on EADS's books at 3.5 billion euros ($4.2 billion).

"Corporate tension between Airbus and EADS is probably really hitting home for the first time," Aboulafia said. "You've got priorities of EADS, which are defense and keeping shareholders happy, and then you've got Airbus, that's screaming for new product-development cash so they can compete."

Airbus has said developing the A350, to be based on the current A330-200 model, will cost 4.3 billion euros ($5.2 billion). Designing an all-new plane could cost at least twice that amount, according to Steven Udvar-Hazy, ILFC's CEO.

Humbert spoke three days after Singapore Airlines CEO Chew Choon Seng told journalists the A350 should be redesigned as an all-new plane with a new fuselage instead of adapting the A330- 200.

Hazy said March 29 that Airbus should scrap the current A350 design and plan for an all-new fuselage and wing to make the model bigger and faster.

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