Airlines

Boeing's 787 Delay Stokes Airbus Rivalry


Boeing's ( (BA)) fresh delay for its long-awaited Dreamliner—its sixth in two years—could not come at a worse time for the Chicago planemaker. Customers are complaining publicly about the company's inability to meet its commitments, as some did at last week's Paris Air Show. And some are going so far as to move their business to Boeing's archrival, . The new holdup, announced on June 23, which Boeing says it decided on last week but apparently kept under wraps until after the big aviation show, seems likely to cost the carrier both business and credibility. Its stock sank on the news, down 3, to 43.90, in early trading Tuesday. Qatar Airways Chief Executive Akbar Al Baker, who is waiting for up to 60 of the new 787 transcontinental jets, groused openly at the Paris show about the U.S. aerospace giant, telling reporters that the carrier has "some serious issues" with Boeing. He added that Boeing will be in for a "serious surprise" if the issues can't be remedied. In addition to its orders for the Dreamliner, Qatar has 80 orders with Airbus for its forthcoming rival new plane, the A350. Already, the delays are forcing some carriers further into the arms of Airbus for alternatives. , for instance, announced on June 22 it was buying 10 new Airbus A330-300 planes, for delivery by 2012. Virgin was not expecting to take delivery of Dreamliners it has on order until 2013, and could now be waiting still further. Reinforcing a Section of the Plane Troublingly, Boeing pointed on June 23 to the "need to reinforce an area within the side-of-body section" of the new 787. This structural issue is serious enough that Boeing could not provide a new timetable for the jet's first flight, but would say only that it will be "several weeks" before the new schedule is even available. Boeing executives sought to play down the difficulty. Scott Carson, president and CEO of Boeing Commercial Airplanes, said experts have already identified several potential solutions. "Consideration was given to a temporary solution that would allow us to fly as scheduled, but we ultimately concluded that the right thing was to develop, design, test, and incorporate a permanent modification to the localized area requiring reinforcement," he said in a prepared statement. "Structural modifications like these are not uncommon in the development of new airplanes, and this is not an issue related to our choice of materials or the assembly and installation work of our team." Even before the new delay, however, the dogfight between Airbus and Boeing was heating up. Orders for Boeing's new plane have been slipping away, while Airbus continues to book new requests for its A350. The first version of the A350 is scheduled to take wing commercially in 2013. It is designed to compete with both the Dreamliner and the long-established, larger Boeing 777, the company's staple widebody jet. Boeing can point to 866 orders for the Dreamliner—a staggering tally for a novel design that has been delayed for two years and faces a slew of rigorous tests before its first commercial delivery next spring. But, so far this year, the company has lost 58 orders for the Dreamliner and has offset that with only 13 new orders. Airbus Orders Are Healthy By contrast, Airbus can boast of 493 orders for its A350, including 10 booked at the recent Paris Air Show. And, so far, there have been no cancellations. The healthy order book is putting pressure on Boeing to consider tinkering with both its old and new planes to compete. Boeing executives suggested at the show that they may retool the wing design on the 777, develop a new 777 made of composites like those in the 787, or develop a stretch version of one model of the 787, the 787-1000. All that talk of late—and theoretical—design change has Airbus executives crowing. Airbus sales chief John Leahy says Boeing's responses amount to "further confirmation of the winner we've got with the A350. They clearly see a need to do something to upgrade their 777." Boeing officials dismiss the Airbus executive's view as little more than premature chest-thumping, since the A350 is still years off and Boeing's engineers continue to upgrade the 777 regularly in response to customer demand. "We will let our customers tell us what we'll do," says Boeing spokesman Jim Proulx. "The A350 is not clearly defined yet. We have plenty of time to continue to improve the 777." Some analysts agree. They pooh-pooh the idea that the new Airbus plane can compete head-on with the Dreamliner, at least at first. Like the Dreamliner, the forthcoming Airbus jet will be a twin-aisle plane suited to longer distances. It will boast composite materials, making it lighter than conventional planes. But it probably won't be as fuel-efficient as the Boeing jet. Moreover, the first and most popular version of the A350, the A350-900, will be bigger, with 350 seats compared with 210 to 300 for the Dreamliner, and so it won't meet the same needs as the Boeing plane. "I don't see it at all," says Richard Aboulafia, a vice-president at the Teal Group aerospace consultancy. "It's a 777 competitor. It is something Boeing has to think about in terms of rejuvenating or replacing the 777." A350: Future Rivalry But Boeing does expect Airbus's new offering to give it more competition. The so-called A350-800, with 270 seats, is due out in 2014, for instance, and could give the Dreamliner a run for its money. And, even while it has been wrestling with delays on the Dreamliner, the U.S. planemaker insists it has not been distracted from making needed improvements in the 777, which made its debut in 1990. Boeing's newest member of the 777 family, the second of two freighters delivered to Air France as part of a 2005 order, just went on display at the Paris show. Much of the competition between Airbus and Boeing on their new planes is theoretical until they actually put them in the air. "Few airlines are going to jump to a new model when availability is practically a decade away," says Jefferies & Co. ( (JEF)) analyst Howard A. Rubel. "This is a down market, and carriers have the luxury of time to see how the new technology now evolves vs. making a big capital investment." What's more, the battle is colored heavily by the air travel slump. But with orders slipping and its major competitor emboldened, Boeing may have its hands full dealing with unhappy customers. "We are always working hard to stay in contact with and please our customers," spokesman Proulx says. "We're working with each of our customers and we're confident of the value this airplane will bring to airlines and passengers around the world." The new holdup could wind up costing Boeing dearly.
Matlack is a Paris correspondent for Bloomberg Businessweek.
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Weber is BusinessWeek's chief of correspondents, based in Chicago.

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