Airbus' A350 Gets a Lift

The European planemaker's jet wins its first major order, from Qatar, at the Paris Air Show. But Boeing's rival 787 has a big lead in sales

By Carol Matlack and Stanley Holmes

For the aerospace event's opening day at least, it was the Paris Airbus Show. As the company's double-decker A380 megaplane flew graceful loops over the Le Bourget airfield on June 13, Airbus announced a crucial order from Qatar Airways for up to 60 of its new midsize A350 aircraft.

The deal, worth about $10.6 billion, marks the first major order for the jet that the European planemaker is promoting to counter archrival Boeing's (BA ) new fuel-efficient 787 Dreamliner. And Airbus Commercial Director John Leahy promises more are on the way: "We're sitting at 90 [A350 orders] right now, and it's only the first day of the air show. Having 100 by the end of this week is really in the bag," he says.


  The Qatar order is a big boost to Airbus, which has been on the defensive this year as Boeing pulled ahead in new orders for the first time since 2000 (see BW Online, 6/14/05, "Why Airbus is Losing Altitude"). Most worrisome for Airbus, until Qatar's order, the Boeing 787 had won every major competition against the A350.

"The decision was very hard to make as both aircraft types showed very strong advantages in different areas," Qatar CEO Akbar Al Baker said in announcing the deal. Now, Airbus is to deliver the A350s to Qatar from 2010 to 2015, supplementing and eventually replacing the carrier's existing fleet of Airbus A330 aircraft, Al Baker added.

As a consolation to Boeing, Qatar will buy at least 20 of the U.S. planemaker's 777 widebodies, in a deal worth about $4.6 billion. Deliveries will begin in 2007 and continue through 2010, replacing most of Qatar's four-engine Airbus A340s.


  Before the Paris Air Show, Airbus' only A350 deals were an order for 10 planes by Air Europa, a small Spanish carrier, and a pledge by US Airways and America West (AWA ) to order 20 aircraft in exchange for a $250 million loan from Airbus to the two carriers as they prepare to merge. Boeing's 787 has logged 266 orders and commitments, including orders from Northwest Airlines (NWAC ), Air Canada, and Air India -- all of which were heavily courted by Airbus.

To lure customers, Airbus went back to the drawing board on the A350, which was originally meant as a modest upgrade of the existing A330. As currently planned, the A350 will have a newly designed wing made of lightweight composite materials and a fuselage made primarily of next-generation aluminum-lithium alloys.

By contrast, about 50% of the 787 will be made from lightweight composites, and Boeing officials say that should continue to give them the upper hand. Both the A350 and the 787 feature new, fuel-efficient engines. "The A350 is good enough to [render] obsolete the A330 and some [Airbus widebody] A340s -- but falls short of the breakthrough technology of the 787," says Randy Baesler, Boeing's vice-president for marketing.


  Another question hanging over the A350 concerns the financing of the plane, which Airbus says could cost $5.5 billion to develop. As with past aircraft models, Airbus has said it plans to seek loans from European governments to cover up to one-third of development costs. But those loans are the focus of a heated trade dispute that has prompted the U.S. to complain to the World Trade Organization (see BW Online, 6/13/05, "Another Turbulent Paris Air Show").

Airbus parent European Aeronautics Defence & Space Co. has said it might forego future loans as part of the dispute's settlement. Noël Forgeard, Airbus' longtime chief executive who is about to become co-CEO of EADS, said at a press briefing on June 13 the A350 would be built even if government loans weren't available.

With Airbus and Boeing both projecting a worldwide market for 3,500 midsize jets over the next 20 years, the competition between the 787 and A350 is only beginning. And Airbus supersalesman Leahy, who was sidelined by illness for more than a month this spring, is clearly back in fighting trim. He promises more A350 orders not only during the show but also during the next few weeks. He told BusinessWeek Online in an interview: "I wouldn't be surprised to see 200 orders by yearend."

  A Comparison of Two A350 and 787 Models
Plane Seats List Price Flight Range
Airbus A350-800 253 $160 million Up to 8,800 nautical miles
Boeing 787-800 223 $120 million Up to 8,300 nautical miles

Matlack is Paris bureau chief for BusinessWeek. Holmes is a correspondent in BusinessWeek's Seattle bureau

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