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Sat, Sep 24, 2005 - Page 12 News List

High fuel prices good news for aircraft makers

TEMPORARY LIFT Aircraft manufacturers are enjoying a bumper year for orders of new planes because of growing demand for airliners that consume less fuel


Soaring oil prices pose an obvious threat to the airlines. But they are giving a temporary lift to the fortunes of aircraft manufacturers because of a demand for more economical planes, the new chief executive of Airbus, Gustav Humbert, said on Thursday.

"The higher the oil price, the greater the demand for more fuel-efficient aircraft," said Humbert, a German engineer who took the helm of Airbus, the European plane maker, in June.

"We should encourage airlines to buy new aircraft to replace those which are 15 or 20 years old," he said.

Airbus and its rival, Boeing, are enjoying a bumper year for orders of new planes, propelled in part by their competing midsize, long-distance aircraft, the Boeing 787 and the Airbus A350. Boeing, in particular, has successfully promoted the 787 for its fuel efficiency.

Humbert made his remarks in an interview with reporters at Airbus headquarters in Toulouse. He also struck a more conciliatory tone toward Boeing, with which it is embroiled in a bitter trade dispute over what Boeing contends are improper subsidies Airbus receives from European countries to develop new planes.

"We would like a negotiated solution rather than a litigated solution," Humbert said, alluding to the lawsuit that the US has filed against the EU with the WTO.

Humbert's predecessor, Noel Forgeard, said Airbus would not negotiate with Boeing if the dispute escalated into a lawsuit. But Humbert said the two companies should try to settle the dispute because protracted litigation would damage both of them.

"It does not lead anywhere," he said. "We are not afraid of litigation, only the effects of litigation."

Still, he reiterated Airbus' contention that Boeing receives improper aid in the form of tax breaks, research grants from the Pentagon and state subsidies from Japan, which is supplying components for the 787. And he said Airbus was confident that it would receive a requested 1.45 billion euros (US$1.76 billion) in "launch aid" for the A350 from the UK, France, Germany and Spain.

"We cannot live in a situation in which the 787 gets lots and lots of aid, and the 350 gets none, or much less," Humbert said.

He said he expected Airbus to obtain formal approval to build the A350 at a board meeting next month of its parent, the European Aeronautic Defense and Space Co, or EADS. That could coincide with the approval of aid from the European governments.

Airbus said it had 140 orders and commitments for the A350, which will seat 253 to 300 passengers. Airbus chief commercial officer John Leahy said he would book a total of 200 orders by the end of this year. Boeing has 263 orders and commitments for the 787, and says it is in negotiations to sell hundreds more.

As a result, Boeing may surpass Airbus in annual orders for the first time in several years. By Airbus' count, it has 417 orders for all types of aircraft, while Boeing has 629.

Airbus, which was once dwarfed by Boeing, has savored what at times has been its come-from-behind lead, but on Thursday Humbert played down the possibility of falling back into second place.

"This is not the end of the world," he said.

Airbus has other worries, not least a six-month delay in the delivery of its new superjumbo jet, the A380. It was forced to shut down its assembly line in Toulouse from May to the middle of last month because staff members were overtaxed by the demands of carriers to create customized cabins. Airbus tried to recruit additional engineers, but said it could not find enough.

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