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Mon, Oct 15, 2007 - Page 10 News List

Airbus has a lot riding on today's A380 handover

AP , TOULOUSE, FRANCE AND BERLIN

The worst day of John Leahy's life, Airbus' chief salesman says, was facing Singapore Airlines executives and telling them that the very first A380 superjumbo -- already months behind schedule -- would be delayed yet again.

"They just looked at me," Leahy, the European planemaker's chief operating officer, said. "Fortunately they were speechless."

Better late than never has been the mantra, but Leahy may soon be able to breathe easier after today's handover of the much-ballyhooed but problem-ridden A380, a vital step in Airbus' efforts to recover from the vast troubles linked to the superjumbo.

Those delays have hurt more than just profits, denting Airbus' reputation and allowing US rival Boeing Co to sneak into the top sales spot last year. But Boeing itself announced a six-month delay this week to its hot-selling 787 Dreamliner, leaving the double-decker A380 -- at least temporarily -- to claim the limelight.

"The symbolism of the A380 delivery is important," said Pierre Boucheny of Kepler Securities. "What they need to do now is show they can deliver at a decent rhythm of around 40 planes a year."

At the glitzy delivery ceremony, speeches by Airbus' new CEO Thomas Enders and Singapore Airlines CEO Chew Choon Seng (周俊成), as well as John Rose, CEO of engine-maker Rolls Royce, will be followed by a sound and light show focused on the plane that has a list price of US$320 million.

Airlines usually negotiate large discounts and, as a first customer, Singapore Airlines got what Leahy described as a "good deal."

The A380's inaugural commercial flight has been set for Oct. 25 from Singapore to Sydney. Singapore Airlines has auctioned all seats on the first flight on eBay, raising about US$1.25 million for charity.

The flashy features of what Leahy calls a "cruise ship of the sky" may help visitors forget the difficulties of the past two years. But Enders warned in an interview that it was too early to celebrate the end of delays in the superjumbo program.

"The biggest challenges are really still ahead of us," Enders was quoted on Saturday as telling Der Spiegel magazine. "The A380 program will really only be over the hump when we succeed in accelerating production in the next two years as planned."

Enders said the company plans to deliver 13 of the jets in the next year and increase production to four per month by 2010.

Airbus has gone though five CEOs as multiple delays on the A380 program resulted in massive writeoffs and a restructuring plan which foresees 10,000 job cuts over four years, not to mention billions of euros in lost profit.

Morale has also been hurt by accusations that senior managers profited from knowledge about the A380's problems to cash in on share options.

A preliminary report by the French Financial Markets Authority suggests there was "massive insider trading" at Airbus' parent European Aeronautic Defence & Space Co.

Leahy admits to selling shares in 2005 and 2006, but says he is "sure there is nothing really behind" the allegations.

Another question is whether the A380 can turn a profit. Harald Liberge-Dondoux, aerospace analyst at Aurel Leven in Paris, reckons Airbus needs to sell 470 superjumbos just to break even.

Leahy said production will start at around 25-30 jets per year, ramping up to 45 by 2010. Already 16 customers have booked 189 orders or firm commitments and Leahy says that number may exceed 200 by the end of the year.

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