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The Paris Air Show

Airbus Ahead of Boeing -- But Who's Winning?

Crisis? What crisis? Airbus executives are strutting around the Paris Air Show like there was never a problem with the company's planned super-jumbo jet. But the company's list of new orders from Paris is spectacular only at first glance.

Four days into the prestigious Paris Air Show in Le Bourget, the slew of orders has continued almost non-stop for European airplane manufacturer Airbus. The list from Thursday morning alone is imposing: 50 jets for Hong Kong Airlines; 14 for the Colombian airline Avianca; Mandala Airlines wants 25 passenger planes; and discount airline EasyJet is apparently interested in placing an order for 35 jets. Orders continued to roll in late Thursday.

During the first three days of the week-long event, Airbus logged orders for 548 planes, worth a total of $75.7 billion (€56.43 billion) -- not including the Thursday's orders. Airbus executives at the show in Paris were beside themselves with pleasure.

"I can say with conviction that Airbus is back," head of Airbus Louis Gallois told reporters at the beginning of the week when the orders started pouring in.

And Boeing? By Wednesday evening, the US-based plane builder had announced a mere $15.9 billion (€11.8 billion) worth of orders. Is it a complete washout for the Americans?

Hefty Discounts

Not really, say industry analysts. First, the numbers are misleading: Most of the orders received by Boeing are firm bookings, while many of those pencilled in by Airbus are commitments that could change in coming months.

But publicity seems to be playing an even greater role. Bad Airbus press this year has been everywhere. From highly public management rows to persistent, and expensive, problems with the high-profile super-jumbo A380 and long-distance flier A350, the company's image has been dragged through the mud. By announcing a clutch of well-timed orders, company management is hoping to turn that trend around. Indeed, the Wall Street Journal reported earlier this week that Airbus was offering hefty discounts in an attempt to fill the order books. And some of the orders are not even new: An Aeroflot bid for 22 planes was a confirmation of a commitment made in March.

Boeing, meanwhile, is looking past this year's air show to its unveiling party on July 8 for the long-distance cruiser, the 787 Dreamliner. Indeed, Boeing chose not to make any demonstration flights at Le Bourget this time around, reasoning that a big splash now would mean a smaller splash later. Final assembly of the first 787 began in late May in Everett, Washington.

AIRBUS PROBLEM CHILDREN

• Airbus A380
• Airbus A350
• Airbus A400M

REUTERS

The delivery of the largest passenger jet in the world has been delayed repeatedly. Now, the first plane is set to come off the assembly line and delivered -- to Singapore Airlines -- in the first quarter of 2007, more than a year later than originally planned. Singapore Airlines was supposed to take delivery of the first plane way back in 2005. The delays were caused by problems with the complicated cable network and wiring inside the plane. So far, there are some 160 orders for the plane, which can seat 555 passengers in three classes in its standard version. According to prognostications made by Airbus parent EADS, the delays will put a dent in the company's 2006-2010 profits to the tune of €4.8 billion.

Airbus

The two-engine jet is seen as a competitor to the successful Boeing 787 Dreamliner. But Airbus has repeatedly changed their concept for the A350 in the past. Originally, the company wanted merely to modernize the A330 jets, which have been the firm's bread and butter since 1993. When the customers didn't bite, Airbus presented a new concept at the end of 2004. But that too was largely ignored by customers -- the fuselage was seen as being too narrow. Finally, in July 2006, Airbus announced the development of a completely new airplane called the A350 XWB. The jet was set to be ready by 2012, but now EADS is reviewing whether the company has enough resources available for the development.

DDP

The military transport plane was designed primarily with the needs of NATO in mind. But Airbus manager Christian Streiff has admitted that the plane has fallen behind schedule. The first test flights had originally been scheduled for 2008 and the first deliveries planned for the end of 2009. But experts are concerned that, given the problems with the A380 and the additional attention being paid to the giant, that there won't be enough engineers available to work on the A400M. The plane's development is costing billions, but is necessary to take over military transport duties from the Hercules aircraft. The project is the biggest arms-development program in Europe at the moment.

No Symbolic Contracts

In short, say experts, it is too early to speak of an Airbus comeback. The flood of orders shows that the customers trust the company, says Stefan Halter, an analyst for Hypovereinsbank. But, "the orders won't change the fundamental problems with Airbus," he says. The true test for the new Airbus products is still ahead. The A380 will face public scrutiny in October, when Singapore Airlines takes delivery of the first giant jet.

Hamburg aviation specialist Heinrich Grossbongardt likewise hedges his Airbus praise. "The orders are coming from regular customers," he says -- truly symbolic contracts just aren't there.

The symbolism, in fact, has been elsewhere. On Tuesday, Boeing snapped away the customer that was to be the A350's launch customer. Instead, the Los Angeles-based International Lease Finance Corp. placed an order this week for no fewer than 50 787s. Company head Steve Udvar-Hazy told the Seattle Times: "My team at ILFC just doesn't feel Airbus has made enough progress. The (A350) specification definition we have today is not at a stage we're 100 percent comfortable with.... We can't commit until we know what we're buying."

It is a quote that could very well have come from Airbus itself. The company was forced into a thorough and expensive redesign of the plane when customers expressed dissatisfaction with the original blueprints. The first plane now won't be delivered until 2013.

Don't Mention the Euro

The super-jumbo A380 has likewise faced significant and costly delays, mostly caused by technical problems. This autumn's delivery will take place two years behind schedule.

A further problem continues to plague Airbus this week. The company recently kicked off its thoroughgoing cost cutting program Power8 -- designed to generate an additional €5 billion in cash flow from 2007 to 2010. The first cuts have already been made. But the program assumed a maximum exchange rate of $1.35 to the euro. Since many of its customers pay in dollars, it's possible for the euro to be too strong for Airbus, and this week the rate was $1.34 -- and creeping upward.

With reporting by Anne Seith in Le Bourget, France