Boeing Goes Head To Head With Airbus After Dreamliner Woes

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When British Airways takes delivery of its first 787 Dreamliner at Heathrow this week, it will mark another step in the rehabilitation of Boeing's reputation, and a minor victory in one of the world's great corporate battles.

For Boeing, this is a further opportunity to restore the reputation and fortunes of a carbon fibre miracle that briefly took on the air of an industrial disaster when burning batteries grounded the fleet in early 2013. Its gestation has been public and painful: after endless delays in production, the hype over its maiden voyages gave way to safety concerns that grew until aviation regulators took the fleet out of service.

The 787 did not return to the skies, with modified batteries, until late April. But airlines haven't lost their lust for a wide-bodied plane with the fuel efficiency and range of a much larger model – and one that also promises more peace for passengers and bystanders. As British airports push to expand, noise levels may prove particularly relevant and backers of Heathrow's expansion will welcome a quieter presence over west London.

Boeing's arch-rival, Airbus, has not revelled in its competitor's discomfort. Before the Dreamliner saga, the Franco-German business was in the headlines for persistent delays in producing its A380 superjumbo, which then endured high-profile mishaps once it entered service. The discovery of cracks in the wings of the A380 fleet – in the wake of an engine blowout on a passenger flight in 2010 – undermined the allure of a plane that represented the cutting edge of commercial aviation before the Dreamliner came along.

With perfect timing, Airbus has unveiled its response to the Dreamliner's return – the A350. The first of these slightly smaller jets took off from Toulouse on 14 June, in time for a swoop over the Paris Airshow last week. The Airbus plane is less revolutionary than the 787. It has similarly efficient engines and enough carbon-fibre to bring down the weight and the fuel bill, but not the battery-driven auxiliary systems that have plagued Boeing. For an airline industry wary of taking chances as profits tumble, it is a conservative compromise.

At Paris Airbus sold 69 more A350s, mainly to established customers such as Singapore Airlines, along with a good batch for Air France, naturellement. But Boeing secured "commitments" for 102 Dreamliners at Paris as it finally revealed plans for the 787-10 – a stretched model with around 330 seats that will match the capacity of the smaller A350s, entering service in 2018.

Randy Tinseth, Boeing's vice-president of marketing, says the battery problems had delayed the go-ahead despite interest from customers. But he adds: "There is a little bit of magic in that aircraft because of the experience it gives passengers ... The more the airplane is out there in the air, the better it will do in the market because people just love it."

The crucial people who "love it" are airlines who see a way into new long-haul markets on a lighter, fuel-efficient plane. Airports, meanwhile, think it can change the way planners view the economics of certain routes. In Britain this adds to the debate on whether, and where, to expand London's crowded airports. Gatwick trumpeted the merits of the "hub-busting" Dreamliner that Thomson Airways will operate from the airport, claiming its arrival meant that the decades ahead would shift airlines away from the "hub and spokes" model – where passengers fly in on short-haul planes then transfer to a long-haul flight. That is the business plan for the UK's biggest airport, Heathrow. But the Dreamliner gives the likes of Gatwick a chance to offer economically competitive long-haul services with just one runway.

For Heathrow, even more significant is the arrival of BA's first A380 on 4 July. A hole has already been carved in the entrance to the BA hangar, to allow the tailfin of the giant plane to squeeze through. This is the plane of Heathrow's future – doubly so if expansion plans are thwarted. With passengers connecting at the hub, it can load ever greater numbers on a single take-off. Where demand is high, such as on transatlantic routes, the numbers can make sense for airline and airport alike – and potentially for Londoners under the flight path, with the A380 promising to be far quieter than the Boeing 747.

With Boeing's own superjumbo heading for extinction because of the advent of the A380, it's perhaps unsurprising that Tinseth is sniffy about the A380 and its prospects for solving airport capacity issues. "I could take every passenger on a wide-body today, put them on an A380, and that's not going to address the issue," he says. "The way we see the market still headed is more fragmentation ... more flights to more places, rather than bigger and bigger airplanes. That really provides benefit to the passenger because it dramatically reduces their flight times."

Airbus, and plenty of aviation analysts, remain confident about the future of the A380, but it is heavily reliant on one customer. Emirates has ordered 90 A380s and transformed its Dubai airport home to accommodate a plane whose economics match the strategy of the airline and its host hub airport. Only 20 A380s were sold at Paris, to a leasing company, Doric.

While the battle lines are being drawn, many airlines are happy to pitch their tents in the middle. BA and Singapore Airlines have announced carefully balanced orders from both manufacturers in recent months.

Douglas McNeill, investment director at stockbroker Charles Stanley, says that when planning future fleets, "you're never quite sure what would suit you best". The bottom line is the cost and revenue generated per seat per kilometre. "Those might sound like quite simple questions but they're not: the number of people on the plane influences the weight, then the fuel ... Frequency and speed might mean you can raise fares. So airlines are reluctant to commit – they're hedging their bets. It also lets you drive a hard bargain."

This negotiating tactic was claimed by easyJet to bring in its own Paris deal although low-cost carriers generally prefer to run as few aircraft types as possible to minimise crew training and maintenance costs. McNeill says that, to make the sums add up, Boeing would have had to go some distance to undercut Airbus, whose planes are the only ones easyJet now flies.

With such deals potentially valued at tens of billions of dollars, the finely balanced corporate battle has a wider impact: prime minister David Cameron was quick to tweet congratulations to Airbus for the A350 take-off "securing 6,200 UK jobs" – reflecting the fact that all Airbus wings are made in the UK.

Meanwhile, as befits two heavyweights, there was, before Paris, an edge detectable in Tinseth's voice as he talked of the "strong rivalry" and accused Airbus of holding back orders for the show. By the time of the show he had upped the rhetoric to claim that Boeing was outmanoeuvring Airbus: "We've got them boxed and bracketed."

John Leahy, chief operating officer for Airbus, retorted: "Our A350 XWB has been outselling the 787 by better than two to one over the past five years. In addition our [short- haul] A320neo family retains a 60% market share lead. That's a corner I want to stay boxed into."

And the final score in this Paris match? Airbus pipped Boeing with deals worth $68.7bn, for 466 passenger jets. Boeing notched $66.4bn for 442 planes. The running total for 2013, meanwhile, has Airbus ahead by 734 planes to 692. The battle continues.

Powered by Guardian.co.ukThis article was written by Gwyn Topham and Angela Monghan, for The Observer on Sunday 23rd June 2013 00.05 Europe/London

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image: © Sam Howzit

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