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Originally published July 31, 2007 at 12:00 AM | Page modified July 31, 2007 at 9:30 AM

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Airbus A350 muscles in on the 777

While Boeing focuses on getting its best-selling 787 Dreamliner off the ground, it is downplaying a potential challenge from Airbus to the...

Seattle Times aerospace reporter

While Boeing focuses on getting its best-selling 787 Dreamliner off the ground, it is downplaying a potential challenge from Airbus to the star of its current jet lineup, the 777-300ER.

That attitude could cost the company a large order from Australian airline Qantas and risk the loss of more orders in the long term from other carriers.

"Boeing [is] going to be in trouble with the 777-300ER," said Qantas Chief Executive Geoff Dixon in Seattle earlier this month. "The A350-1000 will, if Airbus is correct, produce an aircraft with lower seat-mile costs."

The largest of the planned new Airbus A350 jet family, the A350-1000 is a twin-jet similar in size to the big 777 with the advantage of a lighter, composite-plastic fuselage just like the Dreamliner.

Some big customers want Boeing to answer the challenge by expanding its 787 line with an extended stretch version of the Dreamliner that, like the proposed Airbus A350-1000 — could carry 350 passengers.

Instead, Boeing executives have talked about making incremental improvements to the 777 and said there's "lots of time" to address the threat.

Behind this low-key public stance, Boeing has a major dilemma.

Stretching the 210-seat base 787 design as far as 350 seats would be technically difficult. And besides, Boeing is loathe to undercut the lucrative market for the 12-year-old 777-300ER.

Airbus initially proposed its new A350 jet family as a response to the 787, and the two smaller models of the European jet will indeed go head to head with the Dreamliner.

On this score, Boeing is five years and more than 500 orders ahead. Executives need lose little sleep over this matchup, though the revamped A350 finally became a credible airplane at the Paris Air Show last month by reaching 154 firm orders and 100 customer commitments.

But Airbus in 2006 added the larger A350-1000 variant that takes a run at the 777-300ER — the most modern and efficient airplane in service anywhere.

That move will eventually require a strategic reaction from Boeing.

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Yet on a teleconference call last Wednesday to discuss company financial results, Boeing CEO Jim McNerney had only a low-key response.

McNerney spoke of making some "technology insertions" on the 777, implying some tweaking of the airplane with some 787 technology add-ons.

In no rush

With the A350-1000 not slated to debut until 2015, he said there's "plenty of time to respond effectively."

But that approach, Dixon made clear in Seattle, will lose Boeing a large pending Qantas order.

Qantas already has ordered 45 Dreamliners — 15 of the 230-seat 787-8s and 30 of the 270-seat 787-9s — and it has an order for 20 more pending.

But Dixon is in the market for some bigger airplanes too, probably "upwards of 50," he said.

At a panel discussion of airline customers in Seattle for the celebratory rollout of the Dreamliner this month, Dixon dampened local high spirits when he publicly pushed Boeing to respond to Airbus with a bigger version of the 787 rather than a revamped 777.

He stipulated a lightweight 787-10 with low operating costs that will seat 350 passengers.

If Boeing fails to produce such a version of the Dreamliner, Dixon said, he'll order the A350 over the 787 for his big airplane fleet.

"The plane that we want is not the 777-300ER," Dixon said.

"It's the 787-10 that flies the range of a 777-300ER with a 20 percent lower cost factor. This is what the 787 is supposed to do."

Boeing reluctant

Dixon said he understands Boeing's dilemma and will give the manufacturer more time to consider stretching the Dreamliner to his prescription. But Qantas will decide next year, he said.

Boeing doesn't want to stretch the 787 design that much.

It has already committed in principle to building a 787 to match the A350-900 that seats about 310 passengers. In essence, that means replacing the smaller 777-200ER, which hasn't been selling well in recent years.

Emirates has called for Boeing to formally launch this bigger 787-10 model as it weighs a huge order for 60 to 100 wide-bodies this year, but it has not publicly demanded the super-stretch version Dixon wants.

Going to 350 seats would stretch the Dreamliner's design limits.

An airframe design and engine performance targeted to carry 200-300 passengers would not be as efficient operating at such a capacity.

"Boeing may not be able to do that optimally," said industry analyst Scott Hamilton.

Besides, Boeing has too much invested in the 777 to contemplate ending that production line prematurely.

The larger 777-300ER has been a huge seller in recent years against Airbus' four-engined, gas-guzzling jets in that size category.

Plane makers typically produce an airplane for at least 25 years before thinking of superseding it with a replacement. In 2015, the 777 will be just two decades old.

And development of the aircraft was famously overbudget, costing Boeing somewhere between $10 billion and $12 billion, according to Hamilton.

The 777 has garnered 973 orders since launch, and more than 330 remain to be delivered.

But Boeing likely needs a production run well beyond that to earn a decent return on its investment.

Replacement cycle

Scott Carson, head of Boeing's commercial division, suggested in Paris that Boeing will respond with a 777 replacement entering service according to the normal development cycle, to trump the A350 around 2020.

That strategy is eminently rational in the long term.

"McNerney is right," said Hamilton, "They have a lot of time to figure this out."

The question is, how much will the A350 hit 777 sales in the meantime?

Through Thursday, Boeing had sold 72 of its 777s this year.

But Airbus, thanks to its big haul in Paris, had booked orders through the end of June for 97 A350-900s and -1000s — the models that match up in size and pricing against the 777.

"That is a real shot across the bow to Boeing," said Hamilton. "Airbus is indeed going to eat into those [777] sales."

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Copyright © 2007 The Seattle Times Company

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