Paris Air Show: Not Much of a Party

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That could cut deeply into the 200-plane order book for the double-decker, making it even harder for Airbus to sell the more than 420 it will need to break even on the plane, which cost more than $15 billion to develop.

Production-Delay Damage

Another potential money pit for Airbus is the A400M, being developed for European military customers. Mired in production delays, it has already cost Airbus parent European Aeronautics Defence & Space more than $3 billion in writedowns. On June 11 the A400M suffered another blow when the French and German governments said they wouldn't decide for another six months whether to proceed with the project. Because the A400 has missed production deadlines, customers have the right to cancel, which would force EADS to absorb billions in additional costs.

Boeing, meanwhile, faces ongoing problems with its new 787, which is already two years behind schedule. The company says the all-composite plane will make its first test flight before the end of June and will enter service in 2010. But buyers, including ILFC, the plane's biggest customer with 74 on order, are warning that the first 787s to roll off the assembly line will be overweight and won't deliver promised fuel efficiencies, a key selling point. "In the long run, this will be an excellent aircraft, but I pity the airlines that get the first ones," ILFC chief Steven Udvar-Hazy told an industry conference in March.

As tough as things are for Boeing and Airbus, they're far worse for manufacturers of smaller planes. The market for private jets is so abysmal that the two biggest U.S. manufacturers, Cessna (TXT) and Gulfstream (GD), are skipping the Paris Air Show entirely this year.

A Turn to Turboprops

Brazil's Embraer (ERJ), a manufacturer of regional and corporate jets, has seen its order backlog shrink from more than 500 last year to 393 at the end of March 2009, as customers canceled or deferred orders. The backlog of its Canadian rival, Bombardier (BBDB.TO), fell by about 50 planes during the same period. Besides the broader industry slump, the regional jet business has suffered from high oil prices in recent years, as some carriers have opted to switch to turboprop planes that are more fuel-efficient than jets.

It adds up to an unusually subdued celebration of the air show's 100th anniversary this year. But the aviation business has been through brutal downturns before, most recently in 2001 when air travel plummeted 12% after the September 11 terrorist attacks. As in past downturns, it took about three years to recover—but soon enough, growth was soaring again.

Boeing, releasing its 20-year market forecast on the eve of the show, predicts air travel will average 4.9% growth over the next two decades, not much less than the average 5.3% over the past 30 years. Says Boeing's Tinseth: "One thing we know about this industry: It's resilient."

For a look at the spirited 40-year rivalry between Boeing and Airbus, see our slide show.

Matlack is BusinessWeek's Paris bureau chief.

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