Airbus update

As I predicted in earlier coverage of the management troubles at Airbus, the decision on producing a brand new model, the A350 XWB intended to compete with Boeing's 787, is proving difficult.  Engineering and financial resources are already pinched by the need to solve the problems of the A380 whale jet.

Seattle's Post—Intelligencer, published in Boeing Country, summarized recent developments:

Two weeks ago, the respected online industry publication Air Transport World reported that Airbus was rethinking the A350 design to include a composite fuselage. It quoted "key" unnamed customers as telling Airbus that it had not yet done enough with the plane to combat the 787.

Bloomberg News reported Friday that Airbus has indeed decided to redesign the A350 to include more composite and will present the new design to the EADS board Tuesday. Bloomberg, quoting two unnamed sources, said the latest redesign will push the development costs of the A350 from $10 billion up to $12 billion. The changes will delay the jet's entry into service until at least 2013, Bloomberg quoted the sources as saying.

Boeing plans four versions of its 787, the first of which will enter service in 2008.

Bloomberg also reported that the plan would be submitted to the Board of Directors Tuesday, November 7. But then a contrary report appeared from Reuters.

The board of aerospace group EADS will not decide at a meeting this Tuesday whether to launch the A350 XWB mid—sized aircraft, a source close to the company said on Sunday, denying a French newspaper report.

France's Le Figaro, without citing sources, said on Saturday that the board would meet on Tuesday to determine the aircraft's fate.

"There will be no board decision on the A350 on Tuesday," the source said, declining to say whether a board meeting would take place at all.
A battle of press leaks is par for the course in the heavily politicized decision.

In order to be a worthy competitor to the 787, the new XWB will have to have a fuselage made 50% of composite fibers. There are many challenges ahead in acquiring the equipment, skills, and management experience to manufacture such an advanced fuselage on a competitive basis. And then there is the small matter of finding $12 billion or more. So affirming a plan to produce the XWB and giving delivery deadlines to customers means taking a big risk. Spare talent and spare money are in short supply.

But the biggest segment of the market is right where Boeing predicted it would be. If Airbus plays it cautious and doesn't plunge ahead, it will weaken its long term health.

The drama continues.

Thomas Lifson   11 6 06

Update:

Airbus has just announced that it is cutting its direct suppliers to 500 firms, amd is increasing the amount to be purchased from low wage countries by 50%.

This is certain to set off a wave of unrest in Europe, where fear of more unemployment is rife. The company announced that it was pursuing a cost reduction policy.