News that Europe's Airbus SAS received the green light to take orders for a new airplane to compete with Boeing Co's 7E7 Dreamliner could spell more trouble for Boeing's Seattle-based commercial airplanes division.
But analysts say it's too early to tell whether the new Airbus A350 will turn into a formidable long-term threat to the jetmaker, which badly needs a success with the 7E7.
"It cranks up the pressure on the 7E7 business case a notch," said Richard Aboulafia, an analyst with the Teal Group.
Boeing, which is already losing ground to its European rival in jetliner deliveries, has said it intends to log 200 orders for the 7E7 by the end of the year. That's a goal some say has been stymied by Airbus' move to offer a more direct rival model in the A350, although Boeing says it's not the key factor.
On a larger scale, Boeing is counting on the 7E7, its first all-new airplane model in nearly 15 years, to be a key driver for its future growth. That plan could be thwarted if Boeing loses substantial business to the A350.
Analysts say because Airbus has chosen to offer the A350, instead of just competing against the Dreamliner with its existing mid-sized A330, shows that Airbus fears the 7E7 will steal customers away.
"Airbus is panicked about Boeing," said aerospace consultant Mike Boyd. "They would not go with this A350 unless they were absolutely panicked."
For now, analysts say Airbus is proving successful at throwing a wrench in Boeing's plans, using the A350 to at least distract potential 7E7 customers from making a decision.
It could be an embarrassment for Boeing if it doesn't make the goal of 200 orders by the end of the year. But analyst Joe Campbell with Lehman Brothers said the timing of those orders isn't that important since the plane isn't scheduled to enter service until 2008. The A350 is to enter service in 2010.
Analysts say Boeing could still win in the long-term battle, because its airplane is built on entirely new technology and promises vast efficiency gains.
Airbus is proposing a "sister" airplane to its existing mid-sized A330. The new airplane will be lighter and take advantage of engines being developed for the 7E7, while requiring a minimum of retraining for pilots who fly A330s.
Still, Boyd said if Airbus is able to squeeze efficiency gains out of the A350 that even approximate those promised with the 7E7, Boeing will face a more formidable threat. And Aboulafia warned that Airbus could easily morph the A350 from an A330 derivative into a brand new airplane, a move that would create real problems for Boeing.
A major concern for Boeing will be whether Airbus can undercut the 7E7 on price. Many analysts believe one reason Boeing has been losing orders for its narrow-body 737s to Airbus' rival models is because the European company is willing to lose money to gain market share, while Boeing is not. A week ago, Boeing replaced its top commercial airplane sales executive in a move some analysts said was motivated by Airbus' recent successes.
Airbus said Friday that it would offer the A350 for around US$150 million, well above the US$120 million price tag Boeing has put on the 7E7. But airlines typically negotiate steep discounts, and analysts said Boeing should still be worried that a massive price war would evolve.
"Airbus will be throwing those airplanes around like free candy to children," Boyd said.
Another issue is finding the billions of dollars needed to develop the new airplane. European Aeronautic Defence & Space Co., which owns a majority stake in Airbus, declined to say whether it planned to apply for development aid from the European Union for the new plane. Airbus and Boeing have filed claims with the World Trade Organization over what each says is unfair government subsidies for the other.
If Airbus does ask for government aid, Aboulafia said it will make it more likely that US politicians will go to bat for Boeing.
Richard Mills, a spokesman for US Trade Representative Robert Zoellick, declined to comment on the Airbus announcement specifically. But Mills implied that government officials would be unhappy if Airbus sought new government subsidies.
"We've made our position quite clear: We want to see an end to subsidies," Mills said. "Efforts to provide subsidies to a new Airbus plane, if undertaken, would undermine efforts to reach a solution."
CONFRONTATION: The water cannon attack was the second this month on the Philippine supply boat ‘Unaizah May 4,’ after an incident on March 5 The China Coast Guard yesterday morning blocked a Philippine supply vessel and damaged it with water cannons near a reef off the Southeast Asian country, the Philippines said. The Philippine military released video of what it said was a nearly hour-long attack off the Second Thomas Shoal (Renai Shoal, 仁愛暗沙) in the contested South China Sea, where Chinese ships have unleashed water cannons and collided with Philippine vessels in similar standoffs in the past few months. The China Coast Guard and other vessels “once again harassed, blocked, deployed water cannons, and executed dangerous maneuvers” against a routine rotation and resupply mission to
GLOBAL COMBAT AIR PROGRAM: The potential purchasers would be limited to the 15 nations with which Tokyo has signed defense partnership and equipment transfer deals Japan’s Cabinet yesterday approved a plan to sell future next-generation fighter jets that it is developing with the UK and Italy to other nations, in the latest move away from the country’s post-World War II pacifist principles. The contentious decision to allow international arms sales is expected to help secure Japan’s role in the joint fighter jet project, and is part of a move to build up the Japanese arms industry and bolster its role in global security. The Cabinet also endorsed a revision to Japan’s arms equipment and technology transfer guidelines to allow coproduced lethal weapons to be sold to nations
Thousands of devotees, some in a state of trance, gathered at a Buddhist temple on the outskirts of Bangkok renowned for sacred tattoos known as Sak Yant, paying their respects to a revered monk who mastered the practice and seeking purification. The gathering at Wat Bang Phra Buddhist temple is part of a Thai Wai Khru ritual in which devotees pay homage to Luang Phor Pern, the temple’s formal abbot, who died in 2002. He had a reputation for refining and popularizing the temple’s Sak Yant tattoo style. The idea that tattoos confer magical powers has existed in many parts of Asia
ON ALERT: A Russian cruise missile crossed into Polish airspace for about 40 seconds, the Polish military said, adding that it is constantly monitoring the war to protect its airspace Ukraine’s capital, Kyiv, and the western region of Lviv early yesterday came under a “massive” Russian air attack, officials said, while a Russian cruise missile breached Polish airspace, the Polish military said. Russia and Ukraine have been engaged in a series of deadly aerial attacks, with yesterday’s strikes coming a day after the Russian military said it had seized the Ukrainian village of Ivanivske, west of Bakhmut. A militant attack on a Moscow concert hall on Friday that killed at least 133 people also became a new flash point between the two archrivals. “Explosions in the capital. Air defense is working. Do not