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Rebound Delayed for Airbus?

By Carol Matlack Emirates, the fast-growing Dubai-based airline, has dealt a sharp disappointment to Airbus Industrie on the eve of the Paris Air Show. Airbus was widely expected to announce a major order from Emirates for the A350, a midsize jet that the European planemaker is launching to counter Boeing's (BA) hot-selling 787 Dreamliner. Airbus sales chief John Leahy and Noël Forgeard, the former Airbus chief executive who's set to become co-CEO of its parent European Aeronautics Defence & Space Co., flew to Dubai last week in hopes of nailing down the deal.

But an Emirates spokesman now tells BusinessWeek that the carrier doesn't plan to announce any orders at the air show, which opens June 13. "Discussions are ongoing," he says -- not only with Airbus but also with Boeing, which is pitching the 787 as well a long-range version of its bigger 777 jet to Emirates.

Airbus has been hungry for a big deal to regain traction against Boeing, which over the past year has booked 266 orders and commitments for the 787, a fuel-efficient 250-seater that's set to enter service in 2008. The Airbus A350, by contrast, has logged only one order of 10 planes from Air Europa, a small Spanish carrier. Airbus recently lost out in three major sales campaigns, with Northwest Airlines (NWAC), Air Canada, and Air India, that pitted the 787 against the A350.

NOT-SO-MODEST REWORK. Airbus' Leahy declined to comment on the discussions with Emirates. But he acknowledges that selling the A350 has been unusually complicated because Airbus officials were slow to agree on the plane's basic design. As recently as last fall, Airbus was proposing a modest rework of its existing A330. But as Boeing began chalking up customers for the 787, Airbus decided to respond with its own all-new plane.

As currently planned, the A350 will have about 30 more seats than the 787. Like the 787, it will be made largely of lightweight composite materials and will have a new, more fuel-efficient engine. "By not having the right airplane soon enough, we lost some orders," Leahy admits.

Airbus still has a good shot at landing an Emirates order. The airline has ordered 45 of Airbus' doubledecker A380 megaplane -- far more than any other carrier. On June 1, Airbus acknowledged that Emirates and some other early A380 customers, including Singapore Airlines, Australia's Qantas, and Air France, will face six-month delays in deliveries of the plane, which was originally scheduled to enter service in mid-2006. But the Emirates spokesman says the delay, while disappointing, hasn't soured relations with Airbus.

Despite the Emirates setback, Leahy says he expects to book "well over 100 orders" for the A350 this year, with some likely to be announced within a week or two after the air show. "We now have the right airplane," he says. "I wish I had been here a year ago with this, but better late than never." Airbus can only hope the folks at Emirates and other airlines agree. Matlack is BusinessWeek's Paris bureau chief

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