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All Eyes on Airbus

Author: Lee Hudson Teslik
October 24, 2007

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If Singapore Airlines could sell every seat on its new Airbus A380 fleet for $110,000, the price paid on eBay for seat 1A on the October 25 inaugural flight, that surely would allay concerns over the viability of the megajet. The average seat won’t sell for anything close to that amount, of course, though Singapore Airlines says its ritziest accommodations will cost 40 percent to 80 percent more than flying first class on a Boeing 747. Singapore Airlines has bet big on the A380, ordering nineteen. The only airlines to order more are Qantas (twenty) and Emirates (fifty-five). Airbus says it hopes to sell 750 of the jets in total. Whether the Europe-based company comes close will define the future of its competition with U.S. rival Boeing. More broadly, the A380’s success could alter the landscape of the trillion-dollar aerospace manufacturing industry as its major players seek to capitalize on increasing demand for long-haul nonstop flights.

The A380, if all goes according to plan, will not only dominate the market for long-haul aircraft, but will also undercut the success of Boeing’s biggest jet and one of its main cash cows, the 747. Since that plane’s inception nearly four decades ago, Boeing has sold nearly 1,400 (Seattle PI) of the aircraft. Airbus’s gamble is that an even bigger plane will pay dividends. In some seat configurations, the A380 can fly more than twice as many passengers as the 747. But the gamble is no sure thing—just to break even on its costs Airbus must sell at least 420 jets (BBC). As of September 2007, the company had firmed up only 165 sales, though it says it has at least twenty-five more pending.

Boeing, meanwhile, is pursuing a different tack. The company has not attempted to one-up Airbus in size but rather to focus production on its midsize, 787 Dreamliner model. Boeing reckons that global airline deregulation will alter the landscape of long-haul air travel, eliminating the popularity of airport “hubs” and leading to a system where customers increasingly seek nonstop flights from destination to destination. The Economist says the firm calculates it can better capitalize on this new model by building smaller jets that can potentially cover a greater range of airports.

The Boeing-Airbus showdown comes at time of intense competition between the companies. It is also a time when potentially tectonic shifts in the global aerospace industry are beginning to take shape. For decades Boeing and Airbus have held a near duopoly on large-scale aircraft manufacturing. That model seems safe for the foreseeable future, but further down the road, new players in the market threaten to shake up this dynamic. In a recent interview with CFR.org, John W. Bruns, the top executive based in China for Boeing Commercial Airplanes, discusses Brazil’s ventures into the market of small- to mid-sized aircraft manufacturing, and China’s efforts to do the same. China recently announced (Guardian) long-term plans to challenge Boeing and Airbus by manufacturing “jumbo” aircraft. A recent Backgrounder notes the obstacles preventing China from achieving this goal in the near future, but also points out that China’s booming domestic market for new airplanes could act as a power economic spur.

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