Disappointments are extremely a great deal Forum casino en ligne Gagner casino en ligne man to realize and sustain an erection long Online casino wagering Las vegas online casino with an state-of-the-art Casino supermarche en ligne Casino en ligne

banner ad
banner ad

One Market, Two Visions: Boeing 787 and Airbus A350

| February 18, 2012 | 0 Comments

At the Farnborough International Airshow in July 2010, one of the most politically strained battles between North America and Europe resurfaced with much at stake. Boeing, whose credibility has taken a battering since 2000 after the failed 747-X and Sonic Cruiser projects, unveiled its newest passenger aircraft for fifteen years.

 

The 787, named the Dreamliner, made its first international appearance and Boeing used the global aviation event to parade its latest showpiece as the business model for the future. Airbus, Boeing’s long time fierce competitor, was not about to be shunned out of the limelight. Despite launching its competitor program in October 2005, 18 months after the launch of the Dreamliner project and consequently lagging in development, Airbus intended to secure orders for their response, named the A350, and voiced confident noises leading up to the event. During the iconic airshow they secured commitments for 15 A350s but trailed a distant second to the Dreamliner which touched down with a mammoth 860 prior orders under its wings, over 300 more than the A350.

The $150-200 million Dreamliner is designed to be significantly more fuel efficient and economical than its predecessors and, in a new paradigm of extremely high and volatile fuel prices, such a design goal appears crucial to airlines’ success. In contrast to the Boeing 767, the Dreamliner is designed to be 20 per cent more fuel efficient, reduce maintenance costs by one third, operating costs by one-sixth and employ a new innovative electrical architecture that extracts one third less power from its engines. Airbus claim the A350 will be even better, not least by providing a further 8 per cent reduction in operating cost. Such numbers may not appear hugely significant but fuel costs and associated energy considerations have been critical in determining airline profitability in recent years. During the peak in oil prices in July 2008 fuel represented up to 40 per cent of airlines costs and, given the rise in oil prices since 2009, the International Air Transport Association (IATA) estimates that airlines will be faced with a $17 billion increase in their fuel costs from 2009 to 2010. This represents a ten-fold increase in IATA’s estimate of lost global airline revenue as a result of the Icelandic volcanic eruption in March 2010. The reduced CO2 emissions and engine noise also improve the Dreamliner’s environmental footprint. Whilst improving efficiencies, Boeing has not ignored aesthetics within the cabin. With windows that are 65 per cent larger than the industry standard, the Dreamliner has dispensed with old fashioned plastic window shades. In its place lie electrically tinted windows that allow passengers to readily adjust the degree of tint at the touch of a button and even at maximum darkness passengers will be able to see the world passing by. Additionally, the Dreamliner claims to possess health-monitoring systems that allow the aeroplane to monitor its status during flight.

 

At the turn of the century Boeing and Airbus proposed differing visions for the future of air travel. Boeing designed the Dreamliner for direct point-to-point transfer of 200-300 passengers between many cities thereby reducing the need for connecting flights at major hubs; this strategy would allow airline companies to connect at least 450 new city pairs globally. Airbus, meanwhile, designed the A380 – the largest passenger aircraft ever built – in the belief that the future consisted of transporting 500-800 passengers between fewer, larger hubs. The loss of traction of this model and the record sales for the Dreamliner forced Airbus into a major rethink.

 

Airbus’s initial attempt to compete with the Dreamliner was a mere modification of its existing A330 aircraft but this failed to impress prospective customers; for example, using the A330’s 23 year old fuselage did not gain market approval. At the time Airbus were under enormous pressure and could not afford to get this plane wrong – having taken a $6 billion hit in profits from problems with its A380 program, orders for the more expensive $200-270 million A350 were helping Airbus counter its most urgent financial problem, the euro’s rise and the dollar’s fall. Under pressure from sales figures that turned the Dreamliner into the fastest selling passenger aircraft in history, Airbus’ parent company, EADS, sanctioned a $15 billion program in an attempt to halt the Dreamliner’s momentum. The final product differs from the Dreamliner in at least one key aspect: its fuselage consists of a carbon composite skin wrapped around a traditional aluminium frame whilst the Dreamliner fuselage is entirely carbon composite. Whilst lighter than aluminium, Boeing’s daring approach exposes the aircraft to unknown risks such as reduced capacity to shed lightening strikes and less shatter resistance than aluminium. However, the one-piece composite fuselage reduces weight and eliminates the need for 1,500 aluminum sheets and up to 50,000 fasteners.

 

For Airbus, playing catch-up has been significantly aided by a succession of delays that have pushed the Dreamliner project nearly three years behind schedule. Just days prior to the Farnborough Airshow, Boeing announced a sixth delay in deliveries and its waiting customers were extremely dissatisfied. Under fierce competition from local rivals Jet Airways and Kingfisher, Arvind Jadhav, Air India’s managing director publicly derided Boeing’s delivery schedule a “total disaster” as the airline struggled without any of its 27 Dreamliners ordered back in December 2005. As a result of having insufficient wide-body aircraft to run its medium-haul journeys, such as between Mumbai and Singapore, Air India has resorted to narrow-body aircraft and incurred payload penalties in the process. The airline now wishes to renegotiate its entire order of 787s and impose stiff penalties on further delays and at present the Dreamliner remains just that – a dream. Airbus has tried to learn from Boeing’s mistakes and adopt a more conservative approach. Louis Gallois, CEO of EADS, has cited reduced outsourcing as one such area; by reducing the level of outsourcing from 80 per cent to 50 per cent Airbus is hoping that late design issues, parts shortages and fitting errors that hampered the Dreamliner will be less of a thorn whilst conceding that most of their buffer in the A350 delivery program has already been eroded. Additionally, Airbus plans to simplify its huge supply network by reducing the number of key contractors from 250 to just 70.

 

The war between the two firms would not be complete without the political fires being stoked by the continued court battle regarding alleged illegal subsidies. Boeing has long complained that Airbus has benefitted from illegal European government subsidies whilst Airbus has countered that Boeing receives implicit financial support in the form of US government sponsored research, such as at NASA centres. In 2004, Boeing unilaterally stepped out of the 12-year old EU-US Agreement on Trade in Large Civil Aircraft that provided for disciplines on government support and brought a case to the World Trade Organization claiming that illegal subsidies were providing Airbus with an unfair advantage and harming Boeing’s sales and market share. In June this year, the WTO ruled in favour of Boeing whilst both sides claimed victory. Boeing claimed that their allegation of “serious prejudice” was upheld by the WTO whilst Airbus claimed victory that the US allegation of “material injury” was rejected. Needless to say, the appeals and re-hearings mean that this case could go on for years.

 

Despite the political wrangling and technological boasts from both sides, orders for both aircraft have been relatively similar. Net of cancellations, the Dreamliner has secured 863 orders in contrast to 530 for the A350. However, the Dreamliner’s headstart has meant that both aircraft have been ordered since 2006 only and during that time the Dreamliner has secured 572 orders versus 530 for the A350. Firm wide, Airbus has delivered more aircraft than Boeing every year since 2003 and, over the 2000-2009 decade, Airbus won 6,452 orders in contrast to Boeing’s 5,927. Boeing, however, delivered 140 more aircraft over this period than Airbus. This year, the largest orders for both aircraft have come from the US carrier United Airlines which has ordered 25 variants of each.

 

The technological and efficiency comparions, coupled with the ever-present legal battle between the two manufacturers will have a major influence on an industry worth $3 trillion over the next two decades. New competitors, from China and elsewhere, will undoubtedly alter the landscape. However, at present, the war is between just two firms and in a multi-billion dollar industry with only two major players, one competitor’s turbulence can be the wind beneath the other’s wings.

Tags:

Category: Articles, Business, Photos

Ozan R. ADAN

About the Author ()

Ozan is the Editor-in-Chief of BN. He has worked at various consultancies on energy and the Middle East and specialises in Political Security. He has a BA from SOAS and an MSc from Birkbeck in Political Science. Follow Ozan on twitter.com/ozanadan.

Leave a Reply

 
banner ad
banner ad
This site is protected by Comment SPAM Wiper.