Diverging Flight Plans at the Paris Air Show

Airbus is stretching the standard design while Boeing focuses on hot new technology. Who's right? The winner could control the skies

By Stanley Holmes

The 2001 Paris Air Show will be remembered as the year that Boeing (BA ) and Airbus finally chose to fly in different directions. Airbus Industrie stole the show by announcing its largest aircraft order ever, while Boeing was left with a series of public-relations events spotlighting its new direction as an aerospace-technology company -- but few orders.

Give Airbus the edge on the marketing battle at Le Bourget. It chalked 155 total orders at the show to Boeing's three. But a more fundamental shift in emphasis took flight this year. For Boeing, the message was about how new technology can reshape the flying experience, with smaller, faster jets avoiding congested hubs. The company emphasized how a convergence of new and existing technologies is making innovative products possible -- such as its high-speed Sonic Cruiser jetliner, its plans for airplane Internet access, and a satellite-based air traffic management system. "We're at an inflection point, and it's being driven by the convergence of new materials, propulsion systems, and information technology," says George Muellner, Boeing's senior vice-president of its research arm, called Phantom Works.

For Airbus, the show was all about preparing the flying public for bigger, more comfortable jetliners -- perhaps equipped with bars and online casinos -- all the better to absorb increased numbers of passengers. The emblem of this strategy is the European plane maker's new 555-seat A380 airliner. This large, conventional airplane may be the last of its kind ever built -- the end of more than 40 years of the tube and swept-wing design that brought the world into the jet era. "The inflection point is for comfortable, longer-range, efficient airplanes," says Airbus Sales Chief John Leahy, "not for design concepts that look good in Popular Mechanics."


  Make no mistake: These are vastly different visions of how travelers will fly in the future -- and if either strategy backfires, it would leave the loser sucking the other's jet fumes for years to come. But the two rivals, shaped by their own respective economic and political cultures, appear ready to wage aerial combat for dominance. Boeing, driven by equities markets demanding higher profits, is using technology to create new products with a big payoff. Airbus, insulated somewhat from market forces through subsidies and various other forms of government support, has the luxury of being able to focus on one thing: building and selling airplanes.

Leadership of the world's commercial-aviation market is at stake. And by conventional measures, Airbus appears to be pulling out in front. As in past air shows, the Toulouse (France)-based aircraft company announced a flurry of new jet orders, including the record-setting purchase by International Lease Finance Corp. (ILFC) of Los Angeles for 111 planes, at a list price value of $8.7 billion. But in standard industry practice, ILFC is receiving price discounts, which are kept secret.

It wouldn't be a Paris Air Show if Airbus didn't fly its newest long-range airliner -- this time it was the big four-engine A340-500 -- over the chalets in daily flight demonstrations. And Airbus completed contracts with ILFC and Air France for what will become the biggest commercial jetliner ever -- the A380. All in all, a good performance for the Euro-giant, which has closed the gap in its race to supplant Boeing as the world's dominant supplier of commercial jets.

Airbus' performance during the week also reaffirmed its basic strategy. The company is tempering its brash marketing style with more conservative airplane designs, addressing growing numbers of passengers and airport slot congestion with bigger jetliners. Its mandate is to design and build airplanes -- the bigger the better. Despite the risks inherent in any new airplane design, Airbus' strategy is a remarkably stable approach. "It's a very traditional, very conventional, and very static view of the world," says Richard Aboulafia, aerospace analyst for The Teal Group.


  In a reversal from past air shows, Boeing played down the emphasis on new jet aircraft orders and heralded its new technology in a series of PR events. Perhaps the most surreal was the unveiling of a large, detailed model of its Sonic Cruiser, which featured futurist author John Naisbitt. As the packed group of journalists waited for more technical information on the radical and controversial new airplane, Naisbitt kicked off the press conference by talking about cultural and social trends, and how air travel and the Internet are "bringing people together."

Few new details were disclosed about the Sonic Cruiser, a high-speed jet that Boeing believes would fit the demands of travelers wishing to fly point-to-point. For years, Boeing has argued that the greatest demand will be for smaller and faster jetliners for travel to specific cities, avoiding congested hubs. Boeing says the Sonic Cruiser, which will hurtle through the skies at just shy of the speed of sound, will cut long-distance flying time by 20%. "This new airplane will change the world as dramatically as did the introduction of the Jet Age," boasts Alan Mulally, CEO for Boeing Commercial Airplanes.

At the very least, the plane represents a set of maturing technologies that engineers had re-examined about a year ago, drawing from supersonic and aerodynamics experts from the F-22 and Joint Strike Fighter programs, as well as from an aborted NASA program to build a new supersonic transport. Engineers are still working on the specific design and performance details, which could take up to a year to sort out. But John Roundhill, one of the Sonic Cruiser's chief designers, says "we are absolutely serious" about following through.


  All three jet-engine companies are developing new engine technologies for the Sonic Cruiser. And David Calhoun, CEO of GE Aircraft Engines, believes there is a "genuine desire" to build this new jet plane. For its part, GE is going to use the core of its powerful GE-90 engines, which power Boeing 777s, and combine it with new technologies that have been developing for the past 10 years. "We're committed, and we think [the engine] will take advantage of real technology being developed," Calhoun says. "I see it as a real winning scenario, if everyone can pull it off."

Boeing's new approach may be an attempt to counter its lack of aircraft orders, or it may be a genuine attempt to shift the debate about the future direction of air travel. In either case, Boeing's chief salesman, Seddik Belyamani, says that deliveries -- and not orders, which can be canceled -- are the best measure of the competition between the two jet manufacturers. "There is nothing magic about this week," Belyamani says. "We're not going to hold orders for the air show." Last year, Boeing delivered 489 jetliners, Airbus 311.

At last year's Farnborough air show in Britain, Boeing chalked up more than 200 orders, valued at more than $20 billion. And it secured 611 total plane orders last year, compared with 520 for Airbus. In 2001, Airbus has announced 299 orders, vs. 124 for Boeing. But by the end of the year, Boeing should have collected about 400 new airplane orders, Belyamani says, which is what both jet makers have been forecasting.

Boeing's bold attempt to remake itself ultimately will be judged on the return it brings to its investors. "The markets are driving Boeing to search for more technology to try come up with grand ideas for improving profit margins," Teal's Aboulafia says. Wall Street will be watching the skies.

Holmes, who covers Boeing from the Seattle bureau of BusinessWeek, was on hand for this year's air show.

Edited by Thane Peterson

Before it's here, it's on the Bloomberg Terminal.