FLUG REVUE June 2006: Boeing 787 versus A350

June 2006

BOEING 787 VERSUS AIRBUS A350

By Sebastian Steinke

Two new aircraft types that are pitted against each other in the lucrative midsize market segment are currently preoccupying both fans and industry: the Boeing 787 and its adversary, the Airbus A350. The two new twin-jet families both have a transpacific range and thus are targeted primarily at the requirements of the Asian growth markets.

Boeing 787-3

Whereas Boeing has boldly entered new terrain as regards the development cost of the 787 and has begun the revolutionary design from composite materials as if it were starting with a blank piece of paper, with the aim of finally replacing the elderly 767, Airbus initially talked about cost savings made possible by reusing parts from its present success model, the A330. Only later was it upgraded with ever more high-tech features, including new metal alloys and electronics from the A380 programme, until today 90 percent of its parts are new compared with the A330. Can the A350 really defy the 787?

A clear no was the terse judgement pronounced in public by Steven Udvar-Hazy, chairman and CEO of international leasing company ILFC, at the 23rd conference of the International Society of Transport Aircraft Trading (ISTAT) in Orlando, Florida. Before a public consisting of 700 senior industry representatives, including John Leahy, Chief Operating Officer Commercial of Airbus, Udvar-Hazy asked for changes to the A350's design which by the summer would be of the order of billions, among them a new, wider fuselage cross-section and a brand new wing for a significantly higher cruise speed. Otherwise the A350 would only be able to claim one-quarter as many sales as the 787. Udvar-Hazy's assessment was immediately seconded by Henry Hubschmann, president of the world's biggest aircraft leasing company, GECAS, who was also present at the conference.

“If Airbus goes to the trouble of integrating new engines, a modified wing and a new cockpit, they should also use a new fuselage,” agreed Chew Choon Seng, CEO of Singapore Airlines, in a discussion with journalists in passing during the celebrations marking Swiss's entry into the Star Alliance in Zurich. On the other hand, Lufthansa CEO Wolfgang Mayrhuber on the same occasion pointed out that, as far as Lufthansa was concerned, there was no point in adding new technical features such as a change in the fuselage cross-section just for the sake of it, but such steps should only be taken if as a result it would mean that new systems could be installed or product characteristics could be significantly improved in ways that were not possible without change.

The fuselage width is primarily determined by the question of whether, as in the 5.74 metre wide 787, nine Economy Class passengers can be squeezed into a very tight row of seats or only eight, as in the 5.64 metre wide A350 with the only internally slightly widened traditional Airbus cross-section. On the other hand, the LD3 containers widely used in the cargo business fit equally well in pairs in the 787 and the A350. The 787 will be Boeing's replacement for the 767, whose slightly narrower fuselage was just too small to take LD3 containers arranged in pairs.

Whereas, with 100 firm orders to date and a further 82 letters of intent, the A350 cannot exactly be described as a flop, its rival, the 787, which was launched earlier, has already notched up 298 firm orders and 88 letters of intent. According to Mike Bair, head of Boeing's 787 programme, Boeing will decide this summer whether to step up the 787 production rate. The company, he said, was currently negotiating with 30 airlines regarding a further 500 aircraft. He was expecting a new customer “from central Europe” to come forward before the end of the year. Moreover, the company was currently considering a stretched version, the 787-10. In response to a question from FLUG REVUE, Mike Bair said, “The question is no longer whether we will build it, but when.” Bair sees the fourth quarter of 2012 as the earliest possible date for deliveries of a 787-10 to commence.

The discussion regarding Airbus's own twin-jet is taking place at a less than optimal time: the A380-800 programme is currently under great time pressure to overcome the last hurdles to certification and is demanding the undivided staffing and financial resources of its manufacturer before the development team can begin to think about the next variant, the A380-800F, and subsequent versions. Meanwhile the Airbus designers also have to look after the technologically challenging A400M military programme and keep an eye on the build-up of production of the airlifter.

Meanwhile changes currently under way in the shareholder structure of EADS are having a somewhat dampening impact on the willingness of the manufacturer to take financial risks. Six years after the foundation of the company and shortly after the announcement of record results (see FLUG REVUE 3/2006), major shareholders DaimlerChrysler AG and Lagardère SCA announced their intention to each reduce their EADS stakes by 7.5 percent by April 2007, cutting the German and French blocks back to 22.5 percent each. This parcel of shares, which will be placed on the market as scattered holdings, should realise over Euro 4 billion. DaimlerChrysler intends to concentrate more on its core business of building cars, while Lagardère is to concentrate on its media business.

The third major shareholder of EADS, BAE Systems plc, has recently announced its intention to sell its entire 20 percent share of Airbus with 13,000 directly associated jobs. According to rumours which have been circulating for some time in the industry, the British would prefer to sell their shares to the Germans and French and to invest the proceeds in the US defence industry. However, nothing should change as regards the practical production flow at Airbus UK and the division of work, at least until the A320 successor comes along.

The latest customer requests voiced by Steven Udvar-Hazy would make the A350 programme a lot more expensive. Instead of the presently assumed development cost of under five billion collars, the programme could be expected to cost eight to ten billion dollars, not much less than the 787 development programme, which has been costed at $11 billion. Moreover the extra new development work would delay the A350 programme, which is already lagging behind the 787, still further.

The 787 production line is already sold out to 2011. However it is not yet clear whether its sophisticated new technology, which may be expected to result in time-consuming teething problems and is based on a complicated global supply network, will really be able to enter into service in the planned timescale of mid-2008.

The cautious commercial posture adopted by Airbus over the A350 could pay off when it becomes a question of whether to design a successor to the A320. Here we can expect to see the next “fight to the finish” between Airbus and Boeing, as soon as a new generation of engines becomes available. In view of the strategic importance of the A320 successor, compared with the A350, Airbus is likely to come up with a brand-new design. But squandering the resources necessary for this prematurely on the A350 could possibly rob the later programme, which is actually more important to the company, of critical financial resources.

On the other hand, the A350 is aimed at a market which, as far as Airbus's regular customers are concerned, is already well supplied with numerous, relatively young A330's and A340-300's. Covering this limited market volume with a less expensive A350 could bring dividends to the airlines, if the lower development costs are passed on to the customers. Nevertheless, Airbus CEO Gustav Humbert announced at the opening of a new Airbus delivery centre in Toulouse named after Airbus pioneer Henri Ziegler that he intended to consider additional customer requests, even if this would require extra resources.

From page 20 of FLUG REVUE 6/2006

Last updated 10 May 2006

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