Airbus Wins Approval to Offer A350
Airbus Wins Approval to Offer A350, Challenge Boeing (Update4)
By Andrea Rothman and Fred Pals
Dec. 1 (Bloomberg) -- Airbus SAS, the world's biggest maker of commercial planes, won parent company approval to develop the 300-seat, long-range A350 XWB airliner to challenge Boeing Co.'s 787- and 777s, the planemaker said.
The aircraft is scheduled to enter service in 2013, five years after Boeing's 787 model, with development costs spread from 2007 through 2014, EADS and Airbus said in statements sent by e-mail today.
Committing to the A350 assures that Airbus doesn't cede most of the widebody market to Chicago-based Boeing. The plane is Airbus's sixth attempt to create a competitor for the 787, which has won more than 430 orders and may help Boeing retake the lead in building large airliners. The market for planes seating 200 to 400 passengers is valued at about $30 billion annually.
``They didn't have a choice, they had to launch the plane, as aircraft of this size represent some 40 to 45 percent of the market in the future,'' said Yan Derocles, an analyst at Oddo Securities in Paris who has a ``reduce'' recommendation on EADS shares.
The A350 will be financed ``predominantly from the company cash flows, with strong contribution from the Power8 program and from risk-sharing partners,'' EADS said in the statement. The Power8 program is a cost-cutting plan aimed at shaving 2 billion euros from Airbus's costs annually by 2010.
EADS made no mention of possible help from European governments, which in the past have generally provided a third of development costs in the form of loans. The bulk of development spending will occur from 2010 to 2013, EADS said.
Carbon Fiber
Shares of EADS rose 66 cents, or 3 percent, to 22.87 euros in Paris. The stock has fallen 28 percent this year compared with a 27 percent gain for Chicago-based Boeing. Boeing shares rose $1.02 to $85.55 at 4:16 p.m. in New York Stock Exchange composite trading.
Toulouse, France-based Airbus said in July that the A350 would have wings made from carbon fiber, a move that would increase fuel efficiency by making the plane lighter.
Chief Operating Officer John Leahy said Nov. 17 that the latest plan for calls for 50 percent of the A350 XWB to be composed of carbon fiber, including most of the fuselage. That would reduce weight and save on fuel, airlines' biggest expense after labor. Airbus's previous fuselages have been made of aluminum.
Neither EADS nor Airbus gave details about the plane's structure in the statements.
The 787, which Boeing calls the Dreamliner, will be 50 percent carbon fiber by weight, and 20 percent more fuel efficient than models it replaces, according to the planemaker.
Falling Behind
Emirates, the largest Arab airline, and Deutsche Lufthansa AG, Europe's second-biggest carrier, are among companies that have said they're waiting for Airbus's response to the 787 before placing an order in for long-range planes.
Emirates said in July it may buy as many 100 planes in the 300-seat category from Boeing or Airbus. The order would be worth as much as $20 billion.
EADS and Airbus confirmed they would proceed with the A350 XWB tonight after Airbus Chief Executive Officer Louis Gallois indicated in an interview following an EADS board meeting this afternoon that the decision had been positive. Gallois, who is also co-chief executive of parent EADS, will address journalists at an Airbus press briefing scheduled for Dec. 4 in Paris.
Airbus is struggling to complete development of the 555-seat A380 model, which is two years late and forecast to generate operating losses of 4.8 billion euros ($6.1 billion) by 2010.
Airbus's twin-engine, twin-aisle A330 can carry 250 to 330 passengers, and the four-engine A340 offers 300 to 380 seats. Both models have been losing orders to the 777 and 787.
Airbus said late today that it has won 635 orders through the end of November compared with 823 for Boeing. Airbus has delivered 399 planes year to date compared with 330 for Boeing.
Of the 635 orders for Airbus, 580 are for single-aisle planes and 55 are for A330s and A340s. Boeing's 823 plane orders including 574 single-aisle 737s; 42 jumbo 747s; eight 767s; 57 of its 777 models and 148 orders for the 787. The figures are through Nov. 28, according to Boeing's Web site.
