Tuesday, October 03, 2006

Air Wars: Boeing v. Airbus

I was recently reading an article in the New York Times about the A380, the huge airplane being released by Airbus. For those of you who don't know, it is slated to be the largest passenger airplane in the world... that is... when it finally takes to the sky. It is a double-decker MONSTER that will be configured to carry 555 people in three classes (First, Business, Coach).

Airbus did have a much-lauded test flight of the A380 recently. But, they are having a heck of a time getting the thing built and delivered for its orders. The article above points out that the A380 will be delayed again... so that the company will only deliver 1 airplane during 2007 (down from the 9 promised when they announced their first delay in June). This delay means that he company will lose $6.1 billion in anticipated profits over the next few years.

Now, those who actually know me (at least... some of them) know I have been an airplane nerd for years now. I mean... I love airplanes! (Of course, as I get taller, I love the coach class less and less... but I'm hoping to make enough money to not worry about flying coach in the future).

In my nerdy state, I have annoyed some of my friends with the following prediction: The A380 is a MISTAKE. The whole idea was flawed. The airline industry isn't looking for huge airplanes (albeit the Cargo industry is). They are looking for small, flexible airplanes with a long range to keep up with passenger demand. For this reason, not a single US airline (last time I checked) has announced an order for the A380 beast. And, I don't just say this because I dislike the French. Although, that does give me a sick sense of satisfaction.

Boeing, on the other hand (an American company), has recently announced the 787 Dreamliner. This new airplane will be about the size of the current 767, carrying between 200 and 300 passengers. But, the key here: EFFICIENCY. The 787 will be lighter and more efficient than any other plane its size. In fact, they are talking about 20% better fuel efficiency! That means 20% less emissions per mile! The plane is also lighter... 30,000 - 40,000 lbs. lighter than the Airbus A330-200 (the similar-sized airplane from Airbus).

Plus, Boeing is touting various improvements in passenger comfort and overhead space and humidity. But, the important thing is: The 787 will COST LESS TO FLY. And, with oil prices continuing to rise, shouldn't we be happier about a more efficient airplane?? The airplane will also be FASTER than the 767... flying about Mach .85, about the same speed as a 777 or a 747. And, anybody who has travelled internationally knows that that extra hour or so will be very nice.

Also, the windows are 65% larger than your common airplane port hole. That'll be nice too.

So, while Airbus went for the record largest plane in the world, Boeing actually did some market research, and realized that the market wants a smaller, more efficient, long-range airplane. And, with the logistical nightmare Airbus has created, they are paying for it... in the billions.

The 787 Dreamliner will take to the skies for the first time in 2007, with first delivery set for 2008. And, it already has 420 planes claimed in announced orders (377 of which are firm orders). That is a year before the plane is to get off the ground.

Airbus, on the other hand, only has 159 orders. And, some of the customers are a little terse...

On Tuesday, Emirates, based in Dubai, issued a terse statement suggesting that it was considering scaling back its order for 45 planes.

“This is a very serious issue for Emirates and the company is now reviewing all its options,” said Tim Clark, the president of Emirates. The carrier said that it had been informed by Airbus that its first A380 would be delivered in August 2008, nearly two years behind schedule.

Analysts said the latest delay — the third for the A380 in 16 months — increased the chances that Emirates could substantially pare its order, which was valued at about $13.5 billion. (see linked article above)

Yep, Airbus, that is gonna hurt. Right now, nobody is sure if the entire A380 program will ever break even. Whoops.

As an airplane nerd, I will be excited to one day ride on Airbus' beast A380... just for the novelty. But, for the good of the industry, I think Boeing has made the choice the market wants: the 787 Dreamliner. For that reason, I think they are going to make a lot of money. And, since 75% of the 787 will come from the USA, it is a choice that is good for the US Economy.

So, I don't care if we send our telemarketing jobs to India. We still make the finest airplanes in the world... as well as a host of other products the world wants.

One more reason I am proud to be an American.

That is all.



Nectar said...

I agree completely with you.

I wouldn't call myself an airplane nerd, but I currently work on the development of a future military fighter plane.

Horatio said...

And that doesn't count you as an airplane nerd? Bummer... I do feel alone.


That is all.


Anonymous said...

I have to largely disagree with the above. Whilst the A380 will probably not be used for short haul, it will for long haul, why would airlines want a 200-300 seater from Boeing when they can cram in 555 of us in a Airbus which for your information has also increased their fuel efficiency :) No wonder Airbus overtook Boeing a few years ago ;)

Horatio said...

I'm sorry, your argument is not all that sound. Boeing may have lost some market share to Airbus a few years ago, but as recently as July 2006 those numbers were back down. I strongly think that Airbus picked the wrong horse with the A380.

Let's look at pure order numbers right now. Airbus has 165 orders for the 380 against Boeing's 262 for the 787 Dreamliner. Boeing's manufacturing process is also significantly more efficient, which means they will be delivering those 262 airplanes quicker.

Looking at their page right now... they have only 8 747's on order. Look at the airline market right now... the hub and spoke system is on the outs. People don't want to fly to Frankfurt just transfer and fly to Cairo. They want to fly Los Angeles to Cairo. The market is leaning back toward more direct flights with greater fuel/cost efficiency.

So, honestly, the A380 is an amazing aircraft... but there is such a limited market for the spectacle. In fact, if it wasn't for Emirates and Qatar Airways, I think Airbus would be even more billions of dollars in debt.

Leave it to the French...

That is all.