April 28, 2005
Air combatBy Thomas Lifson
Looking rather like a fat bratwurst sausage with wings, the massive Airbus A—380 supercolassalextrajumbosizeXXXLplus jetliner completed its maiden flight Wednesday. The taxpayers of Western Europe, who have once again coughed—up billions of euros to subsidize yet another creation of the Airbus consortium intended to pummel Boeing and help everyone believe that Europe really is a technologically advanced continent, undoubtedly breathed a sigh of relief.
In all fairness, the Boeing 747, which has been flying for 36 years, is no beauty either, its distended fuselage herniated with an upper deck hump extending only partway back toward the tail. A United Airlines pilot once told me the Boeing jumbo is fondly called 'the whale' by members of his profession. Perhaps its larger competitor can be called 'the salami.'
The motives of Airbus and its corporate parent, EADS in spending $13 billion to build a bigger jumbo are pretty clear. Boeing long ago paid off its engineering, design, tooling, and testing fixed costs on the 747. The variable cost to Boeing per additional airplane shipped is far lower than the sales price, giving Boeing what is known in business jargon as a cash cow, or maybe a cash whale. With no Airbus competitor in its size range, Boeing was not only able to charge a good price for the 747, it also had its foot in the door at most of the world's big airlines, even those who fly the A 320, A 330, and other Airbus models, with all their investment in spare parts, pilot training, and maintenance facilities.
Then there is the little matter of bragging rights. Europe's aerospace industry has a wee bit of an inferiority complex toward the Yankees. Of course, compared to Europe's computer industry, Europe's software industry, and Europe's biotechnology industry, aerospace is doing just great. In fact, Airbus has been outselling Boeing in recent years, a historic counter—reversal and a deep humiliation for the formerly Seattle—based, now Chicago—based aerospace behemoth.
Americans may have forgotten that Europe's DeHavilland introduced the world to passenger jetliners in 1952, only to lose the lead to Boeing, but our cousins across the Atlantic have not. All the worse, in their eyes, that Boeing was paid by the Department of Defence to develop a jet tanker to use with the B—52 fleet, and turned it into the 707.
So, with the A—380 taking to the air, is Airbus all set to deliver the knockout blow to Boeing? Not this year. In fact, Boeing is roaring back to a substantial lead in aircraft orders so far. Following Airbus's announcement of the gargantuan new A—380 a number of years ago, Boeing took a close look at the way the airline industry was evolving and made a bet—the—company decision that bigger is not necessarily better.
Boeing chose to invest its R&D dollars in designing a quantum—leap medium size (roughly 250—280 passengers) ultra long—range, super fuel—efficient new twin aisle airliner, a replacement for a whole range of medium size planes including the 767, DC—10, and Airbus A—330. Boeing named it the Dreamliner, eventually assigning it the number 787, and has been advertising it extensively.
There are some real problems in trying to sell a large number of huge airliners these days, as compared to the 1970sa nd 1980s. For one thing, anyone who has ever gotten on and off a fully loaded 747 understands that it takes much longer to get that number of bodies in and out. I am not anxious to wait in line for immigration, baggage, and customs processing with 600 to 800 other passengers. Nor would I be eager to find out if up to 800 people could evacuate in time to avoid fumes and flames in the event the plane were to run off the end of a runway. If I have a choice between a 747 and a 777 or A—330, flying from San Francisco to Tokyo (as I do today), I will always take the smaller plane, just to save myself time and hassle and worry.
Moreover, the old days, when only a few cities had intercontinental service, and so passengers were funneled to JFK Airport, to board huge planes bound for London, Paris, and Frankfurt, there to be divided into smaller flights for Manchester, Munich, and Milan, are fading away. If you want to fly from Minneapolis to Amsterdam, Atlanta to Dublin, Cincinnati to Paris, or Portland to Frankfurt, you can catch a nonstop flight these days. Much less wear and tear that way, faster, and fewer chances of delay.
While it is true that runway capacity is limited at some of the biggest airports, most notably Narita Airport in Tokyo, favoring operating only the biggest possible aircraft to take advantage of scarce takeoff and landing slots in these few cities, even land—scarce Japan is developing alternative international gateways at a rapid pace. Nagoya to Chicago, Sendai to Hong Kong, Komatsu to Seoul, all nonstop, non—Narita.
Speaking of airports, not that many airports are able to handle a plane as big as the A—380. Supposedly, only four American international airports have gates wide enough and runways strong enough to cope with the new behemoth. One has to wonder if the federal government will be rushing to hand out matching funds to make Minneapolis, Dallas and Denver congenial to the Europeans' gift to 21st century air travel.
Even as Airbus was wheeling out the superjumbo, Boeing has been busily signing up current or hoped—for Airbus customers for its twin—engined medium sized long range airliners, including the 787 in the mix. Air India just signed on Tuesday a massive contract for 50 Boeing such planes, only one day after Air Canada signed on for 32 firm orders and 64 more options. Korean Airlines also went with Boeing this month, and current big Airbus customer Northwest Airlines is reported to be going back to Boeing for the Dreamliner, too, despite flying the same—sized A—330 right now. Obviously, this burst of announcements coinciding with Airbus's big day is not accidental.
Airbus is now reduced to re—engineering its A—330 model, dubbing the revised model the A—350. But even with the new plane coming, Boeing will have a few years with a monopoly on the next generation technology in the biggest segment of the large plane market. And when the A—350 appears, it will be an upgrade, not a brand new plane.
Boeing's strategic position now resembles that of Airbus when it introduced the A—320 single aisle airplane, to compete with Boeing's best—seller, the 737. Airbus took the opportunity to bring to market a brand new plane with a strong technology lead at the time, especially a fly—by—wire, rather than hydraulic—based control system, and an all digital cockpit, not to mention a more advanced wing design, than in use on the 737s of the day. It took Boeing long enough to match Airbus that the European upstart was finally able to build a solid market position, even among US—based carriers.
The shoe is on the other foot, at least for now. But technology never stays stagnant, and Airbus still has access to public subsidies, though the US government has shown some willingness to make a fuss, and counter European arguments that Boeing's defense business constitutes a comparable subsidy. Now that Airbus is part of EADS, which also does substantial defense business, that argument is getting harder to sustain for the Euros.
And speaking of euros: there's the little matter of the valuation of the euro currency. It is up 30% against the dollar in just two years. It is awfully hard to cut prices to match Boeing when your home currency goes up by that much. The strong dollar hurt Boeing back then, and the strong euro hurts Airbus now.
The airline industry, of course, benefits very substantially from having Boeing and Airbus compete for their business. They do not want to face a monopoly supplier of airplanes. We passengers, too, benefit from the competition. So even though I will shun the A—380 as much as possible, I welcome the continued hard—fought competition in the airliner business.
Thomas Lifson is the editor and publisher of The American Thinker.