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It's do or die for Airbus
Seattle Times aerospace reporter
At the largest aviation show of the year, which opens Monday south of London, Airbus is at a strategic crossroads.
The beleaguered European plane maker, seeking to shake months of bad news, is on the verge of announcing a dramatic and risky new wide-body jet strategy.
Industry insiders confirm the now-conventional wisdom that Airbus plans to scrap its current A350 proposal and replace it with an all-new, large twin-jet with a wider fuselage and a faster wing.
More startling is the scope of Airbus' plan.
The new jet family it is considering will compete not only with the midsize 787 but even with the largest of the big 777s, according to Barry Eccleston, president and chief executive of Airbus North America.
This strategy of straddling two Boeing jet categories would mean Airbus is effectively giving up on its current fuel-guzzling, four-engine A340 jet and posing a potentially potent challenge to Boeing's highly successful twin-engine 777.
December 2004: To counter Boeing's 787, Airbus offers the A350 with new 787-style engines and a carbon-fiber wing, but using an existing A330-size fuselage.
October 2005: The A350 is formally launched with customer commitments for 140 airplanes.
March 2006: Steven Udvar-Hazy, chairman of International Lease Finance Corp., leads a barrage of public criticism from leading customers and urges a wholesale A350 redesign before the Farnborough Air Show.
May 2006: Airbus says it is reconsidering the A350 design. Media reports suggest it will go with Udvar-Hazy's prescription of a wider fuselage and a new, faster wing.
June 2006: Airbus announces a serious delay in delivery of its superjumbo A380. CEO Gustav Humbert and the head of parent company EADS, NoŽl Forgeard, both resign.
July 2006: The Farnborough Air Show. Beset with problems on the A380, will Airbus be ready to unwrap a new A350 and meet Udvar-Hazy's deadline?
At the Farnborough Air Show, Airbus will have some spectacular sideshows.
The superjumbo A380 will perform daily flyovers. New CEO Christian Streiff, appointed this month to replace Gustav Humbert after the shock announcement last month of major A380 production delays, will be grilled about fixing those problems.
But in the strategic battle with Boeing, nothing matters nearly so much as the plan to revamp the A350.
Streiff has had little time to review the plan. For that reason, a formal launch of the new jet family could be delayed beyond Farnborough. As of Thursday, Airbus officials seemed genuinely not to know if the company could be ready for showtime.
But there are signs Airbus is preparing for a big splash at its main news conference Monday.
One trade-magazine insider said Airbus has set aside large quantities of ad space in the trade papers published daily at the show. An industry consultant said he's seen a news release with a large order announcement for the new A350, ready to go. He declined to identify the airline customer.
A range of experts agree Airbus must at least sketch out its plan for the A350 — perhaps to be renamed the A370 — at Farnborough. Most expect a go-ahead.
"They can't be silent," said Sammamish-based industry analyst Scott Hamilton. "There are too many expectations out there."
The wide-body matchup
Boeing 787: two engines; 210-300 seats; range 9,200-9,780 miles.
Boeing 777: two engines; 300-365 seats; range 8,860-10,840 miles.
Airbus A350 (current offering): two engines; 250-300 seats; range 8,630-10,130 miles.
Airbus A340 : four engines; 313-380 seats; range 8,630-9,950 miles.
Airbus A350 (new offering?): two engines; 240-350 seats; range 9,200+ miles?
Source: Boeing and Airbus
Expectations have been building since March, when influential airplane financier Steven Udvar-Hazy, CEO of Los Angeles-based International Lease Finance Corp., publicly blasted the existing A350 plan as uncompetitive with the 787 and prescribed exactly what is now in the works: a wider fuselage, a new wing and a new jet category to "replace not only the [midsize] A330s but also the [large] A340 family."
Tightening the screws, Udvar-Hazy gave Airbus a precise deadline: the Farnborough Air Show.
In a July 2 farewell letter to Airbus employees, a copy of which is posted on Hamilton's Web site, departing CEO Humbert made clear Airbus took the criticism to heart and that the leadership had made the key decisions and was poised to announce.
"Airbus is in the final stages of preparing the start of a new A350 as a powerful competitor to the 787/777. Our shareholders will very soon be convinced that we have now got it right," Humbert wrote. "We have taken the time to listen to our customers and are responding to their needs — indeed, several airlines are eager to sign contracts."
March 2003: Boeing announces a competition to select the site for final assembly of its new 787 wide-body jet.
December 2003: Boeing CEO Phil Condit resigns after an ethics scandal and is replaced by Harry Stonecipher. Boeing chooses Everett for 787 final assembly and offers the new jet for sale.
April 2004: Boeing formally launches the 787 with a firm order for 50 from Japan's All Nippon Airways. The first 777-3000ER long-range jet enters service and begins the eclipse of Airbus' four-engine A340 family.
March 2005: Stonecipher is forced out for an extramarital affair with a female executive.
April/May 2005: Sales momentum takes off as Air Canada, Korean Air, Air India and Northwest Airlines announce major orders for the 787.
June 2006: Assembly of the first major section of the 787 starts in Japan. Boeing has 360 firm orders for the 787 and 43 additional commitments.
The decision to take on the largest 777s is the crucial strategic element of the new plan. Boeing isn't expected to develop a replacement for the 777 any time soon.
In a recent interview, Airbus North America's Eccleston identified the 300- to 350-seat A340 as Airbus' "largest challenge" and confirmed the company is considering an enlarged A350 that could compete even against the large 777-300ER.
He said an airplane family spanning the gulf from 240 seats (787-size) to 350 seats (777-size) is "technically quite feasible."
One reason for going ahead is the new longer-range 777s are vastly outselling Airbus' A340/A330-300 large airplane category. In 2005, Boeing sold 155 777s, while Airbus sold 51 of its rival offerings. So far this year, it's 22 777s against four A340s.
The move to challenge both the 787 and the 777 in one fell swoop is an unprecedented but rational move, said Adam Pilarski, an analyst with industry-consulting firm Avitas.
"Airbus has to come up with a revolutionary product, not a rehash of what Boeing has," he said. "They need something to motivate them and also to convince the market."
One engine or two?
But the move to go for a super-size, twin-engine wide-body family could be as risky as it is bold. Airbus needs an engine that can power the airplane it wants.
Eccleston said if Airbus goes ahead with the larger A350 revamp, he expects General Electric and Rolls-Royce to scale up the new high-tech engines planned for the 787 and the existing A350 to meet the higher thrust requirements of a significantly larger airplane.
But it's not that simple.
The new-technology GEnx engine designed for the 787 has a thrust range from 53,000 pounds to 75,000 pounds. Rolls-Royce's Trent 1000 engine for the 787 has a similar thrust range.
In comparison, the massive GE-90 jet engine on the 777-300ER provides 115,000 pounds of thrust.
"It's a very large gap," said Mark Thompson, Rolls-Royce's director of customer business with Boeing. "To get one engine that covers the full span of that is the biggest challenge. It's [a range] we've never covered in the past."
It's unclear, he said, "whether you could cater to that market with one engine or would need two engines."
Thompson confirmed news reports that Rolls is in talks with Airbus about more powerful new engines for a revamped A350.
"Our talks are ongoing," he said. "It's a matter of when." An announcement of a deal at Farnborough "wouldn't be unlikely," he said.
A GE spokesman said that engine maker hasn't made a decision on powering a larger A350 and won't until Airbus nails down its requirements.
As the sole engine supplier on the 777, GE would likely be reluctant to commit to a major investment that would threaten its lucrative position.
Ready to roll
Rolls-Royce, in contrast, is eager to enter the market for giant twin-engines.
But Thompson made clear that Airbus' plan would require a big investment. He said scaling up the Trent 1000 to power a 777-size twin-engine airplane would involve changing the diameter of all the main engine components and redesigning the core.
"In terms of the investment, it would be a whole new development program," he said.
Clearly, a major A350 revamp would be hugely ambitious. As Airbus throws money and engineers at its A380 production problems and the new leadership tries to fix the split French-German management structure that has caused much friction, can the company pull off a new airplane that may cost $10 billion?
Among analysts, perhaps the most pessimistic is former Airbus salesman Doug McVitie, now running consulting firm Arran Aerospace in France. He is a longtime critic of the A380 and of the man behind it, NoŽl Forgeard, the ousted chief executive of Airbus' parent, European Aeronautic Defence and Space.
Like Boeing, McVitie says the A380 is an expensive mistake and that Airbus chose to spend its resources on a niche airplane that distracts from the major market for smaller aircraft.
McVitie thinks Airbus' management turmoil isn't over. He said the leadership of Britain's BAE Systems, which owns 20 percent of Airbus, is not satisfied by the change in CEO and will want more heads to roll and a new management structure in place.
BAE Systems had been about to sell its Airbus stake when EADS' stock price crashed at the news of the A380 delays; the result has been a huge financial blow.
Job on line
McVitie says the head of the A380 program, Charles Champion, could lose his job after the Air Show.
"The feeling in Toulouse is that the key people are completely demoralized," he said. Meanwhile, "Boeing is already out of sight with the 787."
McVitie predicts a painful decade ahead for Airbus, with a major loss of market share to Boeing.
Others remember, though, that a similar epitaph was being written for Boeing less than three years ago when Chief Executive Phil Condit was forced to resign over an ethics scandal and the 787 hadn't yet launched.
"You have to take the longer term view," said Pilarski of Avitas. "Airbus is a solid organization. They will come back."
The head of Boeing's 787 program, Mike Bair, in a recent interview wasn't ready to write off his rival as he awaited Airbus' big move.
"We are in no way counting [Airbus] out," said Bair, "They are going to do something. They have to do something."
Dominic Gates: 206-464-2963 or email@example.com
Copyright © 2006 The Seattle Times Company