The skies were roaring with fighter jets and helicopters at last week’s Farnborough Air Show in England, but the real battle was being fought on the ground.

Executives from European Aeronautic Defence and Space Company (EADS), the parent company to commercial jet developer Airbus, announced plans to revamp its hurting A350 line of aircraft with new wide-body jets, hoping to regain competitiveness against Boeing, which has recently turned a highly competitive horse race into a blowout in the market.

With its current lineup, Airbus has been widely criticized by airlines and experts alike for sending would-be customers to what many say is Boeing's more fuel-efficient, cost effective rival, the 787 Dreamliner. The troubles have been increasing against Airbus in first half of 2006. Boeing has outsold it by a 4-to-1 margin, lifting its stock over 10 percent this year.

At the air show, Airbus announced it will be investing an estimated $10 billion into its new project. The company feels the new A350 XWB (“extra wide body”) more accurately responds to market demand for a plane with a wider body for seating on the aircraft, delivering what it calls uncompromised design as well as the fuel efficiency that airlines crave.

Three's a Crowd

Airbus plans to replace its whole lineup of medium-capacity jet liners with 3 new models of XWB's. The smallest of the lineup will be the XWB-800, carrying up to 270 passengers, followed by the 800 and 900 planes with capacities of 314 and 350 travelers respectively.

While it touted its redesigned plane as the most advanced aircraft family in its segment, Boeing executives quickly scoffed, calling the new A350 a me-too airplane which will offer nothing better than what Boeing will already be providing.

However Singapore Airlines was enthused, giving its intent to purchase only four days after the unveiling. The airline has been one of the most outspoken critics of Airbus' previous A350 and Singapore head Chew Choon Seng found the announcement heartening, glad that Airbus has listened.

With plans on purchasing 20 new XWB's-800's for an estimated 7.5 billion, when only scant technical details on the plane have been released, represented an enormous vote of confidence in the Airbus program according to Airbus CEO Christian Streiff.

Analysts are not so enthusiastic.

The fact that Singapore airlines only bought into one of the three models offered highlights an underlying problem, according to Paul Nisbet, an aerospace analyst for JSA Research.

He suspects that the 700 and the 900 are either too small or too large, given the base they are built on, which is will cause problems in efficiency. The largest and smallest versions having such a spread with the same wing for each, means you have got more wing than you need for the small one, and not as much as you should for the large one, he explains.

Believing that the medium size XWB will compete against Boeing's smaller plane already being produced, the 777-200LR jet, the new Airbus planes stand little chance when the new 787-10 Dreamliners arrive, he says. The Airbus offering is a compromise, where as the 787's are designed to be a large plane.

They did well with Singapore he adds, but I suspect that it won’t completely fill the bill.

Jet Lag

The XWB series could be one of Airbus' most urgent attempts to regain market share and sentiment of airlines. A series of recent missteps and leadership mishaps involving other airplanes in the company has given Boeing a formidable lead, as Airbus finds itself playing catch up.

After Boeing introduced plans for the 787 Dreamliner in late 2003, Airbus immediately wrote off its market prospects, insisting that any competitive response could be met by a simple and inexpensive upgrade of its A330.

Airbus' first attempt came in 2004 with a heavily modified A330, featuring composite wings and new engines. It garnered over 100 orders, but none from any major airline. They effectively misjudged the capacity of Boeing, Nisbet explains, forcing them to go through four costly design changes.

The last reiteration before they decided to complete revamp was $5 billion, putting them in position to launch in 2010. Now we are talking $10 bln and we're talking about 2012 to 2013.

With Boeing 787s scheduled to be in the air by 2008, this could mean Boeing gaining even more of an advantage on Airbus.

However one analyst is a little more conservative. David Strauss, an analyst for UBS wrote in his June report that new aircraft programs typically run into problems and rarely deliver to schedule and we believe the 787 is unlikely the exception.

Economics

Strong plane orders and earnings have lifted Boeing shares 11 percent so far this year and more than 20 percent the last 12 months. On top of this, Boeing reported no quarterly operating losses at any time from 2001 through 2005. Meanwhile, Airbus has seen a 20 percent-plus drop in the stock of its parent, EADS.

Though things may look bleak for Airbus now, things are subject to change. The midsized wide body segment is growing in size and importance, says Richard Aboulafia, an aerospace analyst with the Virginia-based Teal Group. In his report issued in June, he said the market in which Airbus and Boeing are seeing the most contention is also the most lucrative, going from approximately 25 percent in 1990 to almost 50 percent in 2005.

The next 12 months, Aboulafia explains, will determine whether Airbus can continue to compete as a jetliner manufacturer with a complete portfolio of products, or whether it will be reduced to a niche player for the next 7-8 years.

Failure in this market arena is clearly not an option.

United kingdom