Airbus, Boeing Rivalry Intensifies: Airbus Logs Record Jet Orders

Small Plane Boosts EADS Unit; Firm Aims to Ramp Up Boeing Rivalry With Large Model

By DANIEL MICHAELS And DAVID KESMODEL
The Wall Street Journal 

Airbus is expected on Tuesday to unveil blowout order numbers for last year, likely setting an industry record for jets sold in one year and potentially booking almost twice as many orders as rival Boeing Co.

But beneath the rivals' lopsided order totals, the competition is much tighter.

Airbus, a unit of European Aeronautic Defence & Space Co., booked big sales of its small, single-aisle A320, while Boeing logged the best year to date for its long-range, two-aisle 777. As a result, the gap in the dollar value of the two companies' sales is closer than their order totals would suggest. The imbalance highlights intensifying pressure Airbus faces to win orders for its big two-engine A350 model, now in development, to counter Boeing's dominance in the segment.

The average catalog price of Boeing planes ordered last year was roughly $145 million, while the Airbus average through November was roughly $105 million, based on data published by the companies and analyzed by The Wall Street Journal. Airbus Tuesday will release full-year numbers, as Boeing did recently.

Airbus through Nov. 30 booked new orders for 1,521 planes, and 1,378 orders net of cancellations. The 11-month gross tally, its most recent figures, already topped a full-year record of 1,423 gross orders set by Boeing in 2007, and the net was only 35 planes shy of the record, also set by Boeing in 2007.

But 92% of Airbus's orders through November were for its A320 family single-aisle models. It booked 126 orders for big planes, or 71 net of cancellations, although those figures may have improved in December. Airbus sales were boosted by a new, more fuel-efficient version of the A320 family, dubbed the Neo, which accounted for 86% of A320 orders through November.

The Neo's success forced Boeing in July to respond hastily with a promise to update its competing 737 model.

Boeing landed only 150 firm orders for the planned 737 Max. Boeing executives predicted orders will rise this year.

While Airbus cleaned up with its small, new model, Boeing did so with its large 777, which first entered service in 1995. Boeing sold 202 of them, more than in any previous year.

The 777's continued strength is significant for Boeing because it faces expensive delays with two new models: its cutting-edge 787 Dreamliner and a modified version of its venerable 747 jumbo jet. The 777's longevity means Boeing's investments in its current versions are largely completed and so each unit delivered is highly profitable.

Large, long-range models like the 777 can be money-spinners. Giant jetliners—such as the Boeing 747 and Airbus A380—are built in relatively small numbers and require expensive customization. In contrast, slightly smaller models such as the 777, Dreamliner and Airbus A350 and popular A330 are produced in large numbers with limited customization.

Large, long-range models like the 777 can be money-spinners. Giant jetliners—such as the Boeing 747 and Airbus A380—are built in relatively small numbers and require expensive customization. In contrast, slightly smaller models such as the 777, Dreamliner and Airbus A350 are produced in large numbers with limited customization.

Highlighting the 777's popularity, Airbus in December canceled production of its competing A340 model.

Sales of the four-engine A340 evaporated in recent years because it was more expensive to operate than the 777.

The A340's failure was a blow to Airbus, which a decade ago spent several billion dollars to create bigger versions of the plane.

The A340 died because the 777 "is a better airplane," said Tim Clark, president of Dubai's Emirates Airline, which ordered 50 of the year's 777s. Large 777 models can consume as much as 12% less fuel than rival A340 models do, which were "priced out of the market," Mr. Clark said in a recent interview. Emirates operates both models.

Larry Loftis, who heads Boeing's 777 program, said "simple physics" of fewer engines helped the 777 eliminate the A340. "As the price of fuel went up, there wasn't much of a choice for our customers," Mr. Loftis said.

"It is true that the 777 has, over time, edged the A340 out of the market," said Airbus Chief Operating Officer John Leahy, the company's top airplane salesman.

Airbus is replacing the A340 with the A350, which the company expects to enter service in 2014. But the plane has faced several delays.

Airbus officials have said that its development remains challenging. And orders for A350s have slowed, following several strong years. In the first eleven months of last year, the A350 garnered more cancellations than new orders.

Airbus hopes the A350 will eventually eclipse the older 777. Boeing is assessing how to react and will probably modernize the 777 in a few years, industry officials have said.

"We will be in a position, if the market requires, to put in a very significant upgrade of the airplane." Mr. Loftis said.

"With A350 challenges, the 777 appears to have a long run ahead," Douglas Harned, an analyst at Bernstein Research in New York, wrote in a recent report that dubbed the 777 "the big winner" among large jetliners.

Source:   http://online.wsj.com