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Airbus, Boeing battle for huge $1.9 trillion market

Airbus, Boeing battle for huge $1.9 trillion market

PARIS:  Ten years ago when the boss of Qatar Airways which received its first new A350 jet this week, warned Airbus it was flying off course. Boeing was knocking on his door with a fuel effective jet boasting 30 percent fuel savings, thanks to a carbon-composite design.

In Toulouse, some Airbus engineers, riding high after overtaking Boeing and suspecting a short-lived marketing stunt, laughed off the future 787 with a “tail like a dolphin.”

Qatar Airways CEO Akbar Al Baker urged Airbus to take the 787 seriously and said its draft response, a quick fix to its A330 with new General Electric engines, was inadequate.

As Qatar Airways planned for rapid regional and long-haul growth, Al Baker recalls, “There was a requirement for an aircraft that has capacity that is optimal on two fronts: customer comfort and technologically forward-thinking.”

The fluctuating, decade-long journey from half-hearted tinkering to an all-new family of jets highlights a chess game still being played out as Airbus and Boeing battle each other in the wide-body market, valued at $1.9 trillion over 20 years.

Next month, the A350 will start competing with the 787 in the skies, having garnered 778 orders against 1,055 for the 787.

To build the carbon-plastic jets, plane-makers tested themselves to the limit.

“I think they are now pretty well matched,” said Steven Udvar-Hazy, who as CEO of lessor ILFC at the time was the world’s biggest buyer of commercial jets and would prove to be an important influence on the A350’s development.

A decade ago, air travel was changing. Planes with two engines were able to fly farther and were more efficient than big jets with four engines.

Boeing’s twin-engine 777 was beating Airbus’s four-engine A340 in the market for big planes, and Airbus’ huge four-engine A380, the biggest airliner ever, had yet to enter service.

Airbus was strong in the market for small wide-body jets, doing well with its twin-engine A330. But fast-growing airlines such as Qatar and Emirates were demanding more comfortable cabins with space to install new lie-flat beds.

The change might have suggested a new fuselage, a decision plane-makers rarely take more than once every couple of decades.

When Boeing launched the medium-size 787 to compete with the A330, Airbus responded defensively. Its answer, the A350, was basically an A330 with carbon wings and new engines, rather than a new plane.

“People were cringing at the time, saying it was inelegant or ‘How can you put a patch on a broken leg?’ ” said Henri Courpron, chairman of Plane View Partners and former head of Airbus North America.

Soon, Airbus customers in Boeing’s backyard, such as Northwest Airlines and Air Canada, were writing checks for 787s. Airbus found itself straining to compete with both flagship Boeings.

In December 2005, pressure reached a boiling point with two big Boeing wins. Qantas chose the 787; Cathay Pacific picked the 777.

Airbus CEO Gustav Humbert called in his 43-year-old strategy chief, Olivier Andries, and gave him a delicate task.

“I asked him to take the best guys and set up a long-range policy team,” said Humbert, who is now retired.

Humbert urged him to consider whether Airbus could capture 50 percent of the big-jet market, up from 35 to 40 percent, by straddling the largest 787 and smallest 777: around 300 seats.

“I was encouraged to think outside the box … about the whole long-range strategy,” said Andries, now CEO of the engine firm Turbomeca. He declined to discuss the details.

Monitored by a team of retired “Wise Men,” the group of 10 drew up confidential scenarios from makeovers to bold new jets.

In March 2006, Udvar-Hazy, who now runs Air Lease, piled on pressure by urging Airbus to drop its cautious A350.

In Toulouse, it was proving hard to make the business cases stick, but one proposal labeled “1d” looked promising.

It dived deep into a planemaker’s armory of wings, cockpit, cabin, engines and the all-important wider fuselage.

It would cost about 11 billion euros to build, rather than the 4 billion budgeted for the original A350, while setting Airbus up for 20 years with projected sales of 2,000 planes instead of 800. But it was still a step behind Boeing’s 787: The tube would be in metal rather than carbon.