Airbus increasingly confident despite Boeing's paper aeroplane

The respective press conferences of Airbus and Boeing Commercial Airplanes at this year's Paris Air Show may be indicative of the relative moods within the two giants of the aircraft manufacturing industry. Perhaps boosted by being on home turf and certainly excited that their company had finally usurped its US rival at the top of the order book tree, the five wise men of Airbus, led by the wily CEO Noel Forgeard, commanded the auditorium with a swagger conspicuous by its absence two hours later as Alan Mulally played last man standing.

The two companies cannot agree on much these days but both sides share the opinion that now is not a good time for the airline industry. Forgeard described the recent string of events, 9/11, economic downturn, and now SARS, as "the worst crisis ever to hit the industry." Sentiments echoed by Mulally, President and CEO of Boeing Commercial Airplanes who said the current downturn means "that the industry cost-structure is not supportable".

Indeed efficiency is the new watchword at Boeing. For a brief time, when the Sonic Cruiser was on the drawing board, it was speed. There will have been those watching the last flight of Concorde on Saturday who must have had a sneaking wish that Boeing would dust off those mothballs but given the financial plight of the industry that is not an option. Instead the 7E7 Dreamliner is Boeing's latest effort to redress the balance in its ongoing competition with Airbus for the larger slice of the commercial jet pie. The Dreamliner could prove to be an unfortunate moniker for the 7E7 given that the company are not going to commit utterly to production until next year and when one considers that they have scrapped their last two ideas for new planes.

As is the perogative of those in a position of strength, Airbus are none too phased by the prospects of the 7E7, feeling that they have the A330 and A340 already established in that segment of the market. As is well documented, the European manufacturer is firm in its belief that the future lies in big aircraft flying from hub to hub supported by smaller jets performing regional trips. The 550-seater A380 is the prime enabler for this and it has met with a positive response from airlines.

However, Mulally was keen to cast aspersion on the economic benefits of the Airbus giant claiming that it will be 28% more expensive per seat mile and trip mile than the 747. Further to that he said that in 1985 70% of transatlantic flights were taken in large aircraft, 747s, DC-10s and the like, while today that proportion has dropped to less than 5%. Mulally also suggested that the 747 was being written off too soon. When asked whether Boeing had considered building a replacement for the thirty-year-old 747, he said that the company "couldn't build a better aircraft than the 747 now, of its size."

For the moment it is Airbus that holds the whip hand with Forgeard confirming its delivery prediction of 300 aircraft for 2003, a figure regarded as doubtful to achieve in some quarters. He suggested that this year might be the nadir for aircraft orders expecting a figure in the region of 250 planes for Airbus in what he described as a "volatile market". Mulally stated that this year is only the second time in history that the amount of air travel has actually decreased, the first being 1991, during the Gulf War.

Unsurprisingly, the two companies disagree over the potential of the large aircraft segment of the market, that is jets capable of carrying 400 passengers or more. Buoyed by advance orders for the A380, Airbus is convinced that this area offers the most opportunity for growth, Boeing state that it sees the sector as only 11% of the 24,300 aircraft orders it expects over the next twenty years.

Boeing is banking on restructuring its parts; particularly significant is its efforts to improve its defence work to relieve its reliance on the commercial sector, while offering more efficient aircraft to its customers. In contrast to Airbus, the US company thinks passengers want direct flights and the cheaper airlines can deliver that the better.

It has been a tough year for Boeing, which it should be remembered does not have the protection of an umbrella company such as EADS is to Airbus, but Duncan Craig of ATKearney, for one, does not feel that Airbus' current dominance is necessarily here to stay and ruled out Boeing departing the battlefield. "The industry needs two players in order to create the economic benefits of competition therefore the airlines will not let either of them go under."

This opinion is borne out by the big contract of the show, Emirates massive $19 billion binge on 67 new aircraft. While Airbus dominates the order with 41 aircraft in the book, the A380 leading the way, Boeing is not excluded and will build 26 jets for the Dubai-based carrier.

The next few years will be fascinating if the industry does, as predicted by both companies, begin to emerge from its slump in 2005. By that stage the A380 will be in the air not in the factory and how full it is will be a talking point. We will also know whether the Dreamliner is to become a reality or to join the Sonic Cruiser in dreamland.

REF XQQAS XQQEE XQQCR