Taking off in Toulouse (and Seattle)

WHEN the new A380 took off from Airbus's French production base in Toulouse on April 27th, it should have been the European aircraft manufacturer's big week. The successful first test-flight of a 555-seat super-jumbo was quite an event. Instead, Airbus's American rival Boeing almost stole the show. On April 25th, Boeing said that, if all the options are taken up in a new order for widebody jets from Air Canada, the value at list prices would be around $15 billion—making it one of the biggest aircraft orders ever. The following day, Boeing landed a second huge order from Air India. Soon it will announce a third, this time from Northwest Airlines for its new 787 long-haul aircraft.

The timing may well have been deliberate. Nevertheless, the three orders are more than marketing hype, and should worry Airbus. They all come from airlines that have long been big Airbus customers, and they reflect a new sense of purpose at Boeing, which now looks like outselling Airbus for the first time in recent years under its new super-salesman, Scott Carson. They also bring the tally of launch orders for Boeing's new 787 to over 200—impressive for a new plane which has been on the market for only a year. Airbus, by contrast, has only one customer for its rival A350 long-haul plane, and sees orders for the A380 obstinately stuck at 154.

Boeing sorely needed a boost, not least to spread cheer at its civil-aircraft base in Seattle. Airlines have stopped ordering the venerable 747, except in cargo versions, and the firm may soon have to close the production line, along with those of several smaller planes such as the 717 and the 767.

Boeing clings to the hope that the 747 will survive in a new advanced version, carrying 450 passengers (instead of the usual 416), using composite (weight-saving) technology and engines developed for the 787. British Airways, Cathay Pacific and Japan Airlines—three big carriers that have conspicuously avoided signing up for the new Airbus—are understood to be potential launch customers of the new Boeing jumbo, if it ever flies. Several earlier attempts to upgrade the 35-year-old 747 have flopped.

Unless Airbus can soon unveil some new orders for the A380, possibly at the Paris air show in June, scepticism will grow that the €12 billion ($15.7 billion) project will never earn a profit. Airbus needs to sell around 500 (out of its target sales of 700 over 20 years) to earn a real return on the investment.

Strong Indications Of Purple Kool-Aid
And, Don Corleone As Sales Director

Airbus rolled out the A-380 last week, with one heck of a welcoming party. Judging by what went on, the late Reverend Jim Jones was manning the cocktail bar.

In what appeared to be the biggest political circus since Monica's blue dress came back from the dry cleaners, the Europeans all joined together to celebrate, nay, worship, the A-380 WhaleJet. Sort of like a coming-out party for a five-ton overweight debutante. Over 5,000 people were reportedly there. Lots of speeches. Enough dry-ice fog to look like an outtake from Saturday Night Fever. Confetti falling from the ceiling. Music. The heads of state from all over the Continent - enough political suits to fill the Big 'n Tall section at Men's Wearhouse.

And everybody, apparently, was drinking Rev. Jim's Purple Kool-Aid. You just gotta dig some of the grand pronouncements at the gala...

"Under the name of Airbus, Europe has written one of the most beautiful pages of its history," gushed Airbus chief Noel Forgeard.

Jacques Chirac, entertaining all, added to global warming with jingoistic speeches about the glory of France, as if anybody cared.

"We need many other projects of this size and of this ambition," Chirac gurgled, as he called for "a great European effort based on the strength of our businesses and of our laboratories that allows our industries to be at the forefront of innovation and at the heart of tomorrow's markets."

All-in-all, a gutsy demand from a guy running a country with an enforced 35-hour limit on the work week and a legislated month of vacation time. It's a wonder this thing ever got out of the hangar. A gutsy statement, too, about an airplane that is essentially not much more than a composite 747 on steroids.

The Glory of France, England, and Europe First. Market Analyses Second. The whole show looked like a junior high pep-rally that got way over budget. The real story wasn't the airplane. It was the high-level politicos and various other luminaries that surrounded it, and what they really said. Aside from all the gush, the message seemed to be some adolescent chant, "Golly-gee, we got one bigger than Boeing."

We Heard All This 40 Years Ago. Take all those quotes, and it sounds distantly familiar. Just replace "Airbus" with "Concorde" and you've just done a time-trip back to the 1960s, when the whiz-kids of Europe announced a supersonic jet program that was aimed at one thing: Showing the US that Europe could build really fancy machinery. Economic viability wasn't the issue - just the dream was enough. They wanted to show the US that they were big boys, too.

And they did - heck, the Concorde was an airplane that even by today's technology would be tough to build. A 1.5 mach airplane is possible right now. But a 2.0 rocket like the Concorde is a geometric jump. Trust us - we've done the feasibility studies for aircraft manufacturers - the Concorde is a technological wonder for today, let alone the 1960s.

Yessir, the Europeans achieved their goal. They built a supersonic airliner before the US did. In fact, the US never built one. The Russians did - the TU-144, which is best remembered for coming completely unglued in the sky over the 1973 Paris Air Show.

Unfortunately, just building the Concorde was the alpha and the omega of the program. Market demand, mission viability, and economic realities weren't addressed. The result was what is now considered one of history's greatest planning disasters.

See, the Concorde had the operational economics of a flying brick. Far from being the 707 replacement they predicted, the Euros got just 16 of these contraptions built before they tossed in the towel - something that at least the French seem to excel at doing, by the way. Britain and France then effectively gave the airplanes to their respective state carriers, and dropped the whole thing.

So here we are 20 years later, and notwithstanding the success of the superb A-320 and A-340 programs, the Euros still have a bad case of US-envy. So, they went ahead and built a jet that was bigger, taller, longer than anything the US has put out. Voila! The A-380. They want to out-do the 747. What they missed is that the 747 is a 1970s concept that may not have much viability in the 21st century.

Some Reality Please. But back to the roll-out gala. The purple Kool-Aid was flowing, jumbojet fans. See, this A-380 sucker is big. Really big. So big that Virgin Airways' CEO declared that he's thinking of installing exercise rooms and casinos and all sorts of other stuff on his A-380s. Just what premium passengers want. A roll of the dice at the crap table, a spin on the Lifecycle, and a trip to the massage parlor, all surrounded by comely female flight attendants in designer uniforms.

Wow, can't wait. It'll kinda be like the Playboy Mansion, 'cept that it flies and won't have Hef wandering around in pajamas looking for a Viagra tablet. Gee that'll really do wonders to the ASM costs of the A-380. (Remember the piano lounges on American Airlines' 747's in the early 1970s? There's a reason they're not there anymore. Come to think of it, there's a reason there's no 747s, period, at AA anymore.)

Let's Get Back To Reality. There's no doubt that the A-380 will be a technological marvel. But the open question is whether Airbus can sell enough of them to make economic sense. They say gazillions. But looking at traffic flows and airport facilities, we can see, best case, 350-400 A-380s over the next 15 years. As for the initial sales announced, nobody knows what the terms were, and when over 25% of the sales are to one carrier - Emirates - one has to question how firm these sales are.

EU: Making Offers Other Nations Can't Refuse? Then we have the issue of the European Union doing the Don Corleone routine on foreign nations to buy the A-380. It's been reported that Thailand has been strong-armed, with an offer they can't refuse. Buy some A-380s, and you won't have any tariff problems with some Thai imports into the EU. Or, China. Remember that arms embargo resulting from the 1989 Tien An Men Square affair? Well, just sign on the dotted line for a fleet of WhaleJets, and everything will be okay, by and by. Don't think for one second these types of EU-government shake-downs aren't in the cards to peddle these A-380s. Remember, it isn't an airplane. It's the honor, the glory, and the reputation of all Europe that's on the line.

In the interests of historical perspective, virtually every new airliner that's come on the market since Wilbur and Orville was declared "too big" by one or more sections of the Luddite community. "Hey, how ya going to fill 21 seats? That DC-3'll never make it..." It was certainly said about the 747, and the years immediately after its introduction seemed to initially prove it. But things are very different now. The R&D costs, the total sector expenses, the capital required, not to mention the issue of airport facilities, all point to a much more limited demand for the A-380 than Mr. Chirac and his buddies seem to think.

"...the A380 superjumbo -- overweight, overbudget, but hailed by its makers as a major European feat that will reshape aviation..." Reuters, January 20, 2005.

The Concorde was supposed to reshape aviation, too.

(c) 2005, The Boyd Group/ASRC, Inc. All Rights Reserved

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Just as Airbus's super-jumbo makes its maiden flight, Boeing bounces back