For some time, Boeing Co. (BA) has been playing second fiddle to Airbus. The European jetmaker has outsold and outmarketed the U.S. aircraft company. Boeing botched two vital sales campaigns that it was expected to win last year -- in Germany and Malaysia. And on Jan. 18, European leaders gushed over the rollout of the new Airbus crown jewel -- the 555-seat A380, which will supplant Boeing's 747 as the world's largest commercial jet.
But don't write Boeing's obituary just yet. Since Jan. 1 the Chicago company has racked up orders for 138 new planes, compared with just 38 for its European rival. That includes 65 orders for its ballyhooed new 250-seat 787 Dreamliner. "When the dust settles, Boeing might be doing a lot better than people previously believed," says Michael Boyd, president of Boyd Aviation, an aviation consulting firm. "The momentum will shift to Boeing because it's about to ride on the wings of the 787."
Both Boeing and Airbus are benefiting from a recovery in the commercial-airplane market. Some of Boeing's sales actually had been notched last year, but the customers delayed unveiling the purchases until recently. And more announcements are on the way. That's why Boeing raised projected aircraft output on Feb. 2, forecasting deliveries will grow more than 17% in 2006, to 380 planes.
The two competitors have made different bets on the future. While Airbus trumpeted its big A380 jetliner to fly between congested hubs, Boeing is pegging its future on the market for smaller jets that fly long distances directly between two cities. Boeing figures the market for planes with 200 to 400 seats -- the 787, 777, A330, and A340 -- at 5,200 units over 20 years. Analysts peg the market for planes with just 100 to 200 seats -- the 737 and A320 -- at 14,000 over 20 years. Both companies agree that the majority of plane sales will be in these two categories. But they disagree on demand for the jumbos such as the 747 and A380, which have more than 400 seats. The A380 has notched 139 orders in four years. Airbus predicts a market of more than 1,200 jumbos, while Boeing forecasts sales of only 800 -- with only half in the A380's superjumbo class.
Whatever happens with the big jets, the 787 is already one of the fastest-selling commercial planes ever. As of Feb. 15, about 15 airlines have placed 191 orders for the airliner, which consumes 15% less fuel than the A330 and can fly nonstop to Beijing from New York. Airbus hasn't announced any formal customer interest in its new A350 -- an upgrade of the A330 intended to compete with the 787.
Nowhere is Boeing's edge greater than in Asia. It has strong bonds in a region where relationships matter. And although its planes sport higher sticker prices, their range and lower costs to operate and maintain give them an advantage in this market. Boeing last year still controlled 53% of the Asian market for widebody planes -- those with 200 or more seats -- according to Airclaims Ltd., a consulting firm. "Boeing has a fortress in Asia, and it's called widebodies," says Morgan Stanley (MWD) analyst Heidi Wood. Aware of its weakness, Airbus recently hired Glen S. Fukushima, a former U.S. trade negotiator with long experience dealing with Japan.
That threat comes on top of an executive shakeout and the airline meltdown after September 11. But Boeing has become much more disciplined. It killed three product lines and focused on the 737, 777, and 787. Now it is considering upgrading the 747 to compete with the A380. "It has been a quiet, confident, and steadfast transformation of the product line and the production system," says Alan R. Mulally, CEO of the Boeing Commercial Airplanes unit in Seattle. All that is producing results. Boeing commercial airplane profit margins will climb from 5.5% in 2005 to 6.5% in 2006. Revenue could grow to $28 billion, up from $24 billion in 2005.
Still, Airbus will probably outsell Boeing for the next six years because of its continued strength in the small-jet market. And it will sell more of its mega A380s. But with brisk sales of the 787s, the air war between Boeing and Airbus is again turning into a real dogfight.
By Stanley Holmes in Seattle