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Airbus Blinking First With A350 Helps Boeing Plot 777 Successor – Businessweek

May 29, 2012

No New Orders

Airbus suffered a setback in April on the A350-1000 when Etihad canceled seven jets, after already paring its order book in December. That left the Abu Dhabi state-owned airline with 12 A350s, less than half the number it originally agreed to take.

While Boeing celebrated the delivery of the 1,000th 777 in March, the A350-1000 has only 62 orders, compared with 368 for the smaller A350-900. The bigger plane hasn’t won a new order since 2008 and has only four customers. Airbus Sales Chief John Leahy said May 25 that there’s a dearth of orders because he has no delivery slots within a reasonable time frame.

“Our biggest constraint right now is production slots,” Leahy said when asked about the A350-1000’s lack of sales.

The A350 is Airbus’s first major program since the A380 double-decker entered service in 2007. Airbus is building the A350 from composite materials that are lighter and promise greater fuel efficiency, though they are less tried than aluminum and require more complex design and assembly.

‘Not Satisfied’

Qatar Airways CEO Akbar Al Baker, who has an order for 80 A350s, including 20 of the largest variant, has publicly blasted Airbus for falling short with the design of the A350, demanding the company fulfill its contractual obligation.

“The aircraft is on the drawing board, we are not satisfied,” Al Baker said in a March interview. “They will need major improvement in range, performance, and fuel burn.”

Boeing is racing to keep up with 777 demand. The planemaker won 202 orders for the jet in 2011, more than any previous year, and is increasing production to 8.3 a month starting in 2013’s first quarter, from seven now.

The popularity of the 777 and Airbus’s struggles on the A350-1000 give Boeing flexibility to choose the best time when to upgrade the plane, Commercial Airplanes CEO Jim Albaugh told analysts at a May 15 meeting.

Albaugh said Boeing’s expectation is that the new 777 would have a wing made of composite materials along with new engines. Albaugh has said he expects Boeing to have a plan for a 777 upgrade to take the company’s board by year’s end.

Emirates President Tim Clark, whose airline is the biggest operator of 777s, said in an interview last month that he was eager to have a successor by 2019 and may order more than 100 over time. He also has said Airbus’s design changes and subsequent delays on the A350-1000 were unnecessary.

Boeing has a leg up on the design of the new 777 because of lessons learned from the design, production and customer feedback on the Dreamliner, which has composite-material wings and fuselage, said Howard Rubel, an analyst with Jeffries & Co. in New York.

“The more time they give thought to how to come up with some incremental and possibly break-through solutions, the better the 777X will be,” Rubel said.

To contact the reporters on this story: Andrea Rothman in Paris at aerothman@bloomberg.net; Thomas Black in Dallas at tblack@bloomberg.net

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net; Ed Dufner at edufner@bloomberg.net

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