Posted on 02/03/2005 4:58:33 AM PST by The Jitters
Both A380 and 787 have bright futures READERS Most media outlets and pundits have seemingly decided that "Airbus vs. Boeing" has to be reported as a boxing match, where, in the last round, somebody goes down for the count. Not so!
Much has been made of how Airbus and Boeing now have two opposite visions of the future. To a large extent, what we hear and read might as well have been cut and pasted from their respective marketing and PR departments, and is largely devoid of any meaningful analysis.
As one commercial jet manufacturer after another has either ceased to exist, been bought out by the competition, or quit manufacturing jets in this market segment, the world is left with only 2 players: "us" and "them." Hyperbolic accusations dominate the debate: Airbus lives on government subsidies, their giant A380 is a dinosaur, the 787 (formerly known as the 7E7) is a "plastic" plane, etc, Boeing’s days are numbered, etc.
Most of this is utter nonsense.
Does the A380 have a future? Airbus has built a plane that offers airlines better fuel efficiency, more comfort, greater range, and perhaps a chance to start making more money in a business that’s currently performing poorly as a whole. Much like the 747 did in the 1970s, the A380 represents a big bet on the future, seeking to transform aviation through economics of scale. Boeing has repeatedly asserted that the plane crams too many passengers together on one flight, that travelers want more non-stop point to point flights, and that the plane essentially is a dinosaur. These statements notwithstanding, at the end of January 2005, Airbus had 154 firm orders and commitments from 15 customers for its double decker “Super Jumbo,” almost 2/3 the number of orders needed for the project to break even (according to Airbus, the magic number is about 250). Though U.S. passenger carriers have yet to place orders, operators in emerging Asian markets in particular have determined that there is a great need for the 500+ passenger plane. Launch Customer Singapore Airlines, who has ordered 10 A380s, has stated that the new planes will be used "to expand operations to heavily traveled cities that have slot constraints." For Singapore it’s not about offering more point to point flights, but rather, to meet increasing demands within existing limitations.
So will this increased capacity come at the expense of passenger comfort? Airbus proposes that their A380-800 (the initial variant of the family’s 3 proposed stretches) seat 555 passengers in a typical 3 class configuration. With almost 50% more floor space than a 747 but only 35% more seats, each passenger will have more room. Many of the initial customers have announced they won’t even deploy that number of seats—Qantas, for example, will outfit their first 4 planes for only 501.
To prepare for the giant, airports around the world are widening and strengthening runwas and taxiways. Emirates, the single largest A380 customer with 45 ordered, already operates new ground-equipment designed to handle the new flagships at their Dubai hub, and are in the middle of terminal renovations that will greatly expand the size of their passenger facilities. Currently, about X number of airports will be ready for the A380 at its launch into service. However, there is no reason to doubt that the number will grow as demand increases.
So, is Boeing just engaging in some good old trash-talk? The two competitors cite very different estimates for future demand. Boeing doubts there is room for more than 320 such jets in the next 20 years; Airbus forecasts a whopping 1,500! Allowing for bias in both companies’ numbers, it seems the A380 program is on pretty sure footing. Projections for international air traffic estimate that passenger volume will double from 2000 to 2015. In many parts of the world, including the United States, airspace is already operating at (often dangerously) high levels of utilization. If there are no available landing slots available, it doesn’t matter if you’re flying point-to-point; you still can’t get a gate to pull in to. It would seem that the future most definitely looks bright for the A380.
So where does this leave Boeing’s 787? Like the A380, the 787 is trying to establish a new niche for itself. It is bringing greater speed, fuel efficiency, range and comfort to the 225 – 275 passenger segment. It will be available in 3 different configurations, competing in segments of the marketplace that already has many viable players; the A330-200, A321, and Boeing’s own 757-300 and 767 (which it officially replaces). Unlike the A380, the 787 will not need redesigned terminals or runways—from a purely utilitarian perspective, the 787 is not so much a new vision of aviation as it is a modernization of the state of the art. The novelty of the 787 is in part supposed to be the ability to fly much longer than other aircraft its size. It remains to be seen if enough city pairs exists worldwide that can support such traffic. Even if there aren’t, Boeing will deliver this aircraft in enough configurations, covering different capacities and ranges, to guarantee its place in aviation.
Most of the excitement—and uncertainty—revolves around the new processes and technologies to be incorporated into the jet. The fuselage will utilize unprecedented amounts of advanced composite materials. Until recently, Boeing wasn’t even sure how they would actually build this new plane that they had promised to deliver in only 3 or 4 years. They have now demonstrated the ability to build the bulk of the fuselage from one, long “pipe,” without the need to bolt pieces together. This allows for greater pressurization, and possibly—but not definitely—a lighter structure, both important to meet design goals. Some concerns have been raised about maintainability—how do you repair minor fuselage damage when you can’t replace individual panels? I have no doubt that Boeing has addressed this issue.
As you might have gleaned from the preceding, it is my opinion that neither Airbus nor Boeing is embarking on wildly different visions of the future. Rather, they are both making incremental improvements to existing technologies. It is likely that both jets will have prosperous futures.
While Boeing has now publicly stated that it is not pursuing its own supersized jumbo, it will continue to sell the 747 for as long as the market demands it. Airbus, for its part, has announced the A350, a competitor to the 787. The plane, a modernized, re-engined version of the A330, shows that Airbus has every intention of competing in this segment of the market as well.
In the midst of all the mudslinging, issues not relating directly to the quality of the product, or the vision for the future, have featured prominently. Loudest of all are accusations, primarily from Boeing and players in the U.S., that the playing field between Airbus and Boeing isn’t level because Airbus receives government subsidies and launch aid. I think it’s worth considering this issues.
First, let us immediately dispel the myth that Boeing goes it alone, operating in a “survival-of-the-fittest” economy that doesn’t hand out free money for R&D. Boeing’s history—and success—is intimately intertwined with Federal and State dollars and aid, even to this day. Several of Boeing’s most successful aircraft grew almost directly out of federally funded military projects: the 707 (and its closely related narrow body successors, the 727 and 737) drew on the KC 135 tanker program, and the 747 borrowed heavily from the C-5 military transporter design. More recently, the State of Washington, home to most of Boeing’s commercial airliner assembly plants, agreed to a generous $3.5 Billion incentive program to ensure that Boeing wouldn’t build its new 787 elsewhere. It has been estimated that for each $65,000-a-year job associated with the assembly of the new plane, Boeing will receive $160,000 a year in incentives. Hardly a company weaned off subsidies (and hardly a sweet deal for the people of Washington.)
The truth is that both companies receive direct aid, loans and subsidies. As Airbus has now outsold Boeing two years in a row, the subsidies-excuse is allowing Boeing shareholders and management to waste their energies on the wrong issues. Boeing’s product line-up is, with the exception of the 777, entirely designed in the 1960s and 1970s. Declining sales is not to be blamed on unfair competition, but rather, in my opinion, on management that has failed to reinvest in R&D and new product development. While Airbus’ 10 or so current models all have the same type rating, have extensive design commonalities, and are all based only two different fuselage cross-sections, Boeing’s line-up was as of two years ago a hodge-podge of 6 mostly different products, mostly poorly integrated, and, as mentioned, averaging 20 or more years of age. In the next few years we can expect all models except the 737 and 777 to disappear, or at least, decline severely. Seen in this context, it becomes clear that Boeing is again placing a bet on the future, and it needs the 787 program to be a success.
Yes I saw that story earlier.
I'm feeling a lot of anger here, Kwasi. Is there something you'd like to talk about?
Surely you can admit that the idea of a gigantic plane is kind of cool? Though, I must say, I don't want to be last in the queue for disembarking. You could be there for days!
Atlanta said, "Nope, aint gonna happen!" I believe others will too.
Are you talking about our allies? ; )
Yeah, but there will be plenty of demand in the Asian markets where they pack 'em in like sardines. I think their, and the Middle East is where the 380 will thrive. I can't see the US airports spending much money to accomodate the planes (I believe the Atlanta airport manager already came out publiclly saying this).
Well, at least some airports are willing to spend http://www.usatoday.com/money/biztravel/2005-01-16-a380-side_x.htm
Yes Atlanta said no and so will most others. Without the US routes and US airline orders for 380s 1500 will never be sold.
JFK, LA, Ontario, Calif, San Francisco are all upgrading to accomodate it.
http://www.usatoday.com/money/biztravel/2005-01-16-a380-side_x.htm
That's for sure. Embraer is going to take a big bite out of Boeing's future profits. I still predict Boeing will exit the commercial airliner business within ten years.
I'm surprised. More wasted tax dollars.
"JFK, LA, Ontario, Calif, San Francisco are all upgrading to accomodate it."
The cost of the airport mods should be paid for by the airlines that fly the 380 but in reality, the costs will be passed on to the majority of travelers who will never set foot on a 380.
Boeing does not build small commuter aircraft. Embraer is not a competitor to Boeing (maybe just a tiny bit on the now-defunct 717 that should have been killed years ago and on the low end of the 737-600 market).
But Embraer is going to start building bigger ones now...just watch. ;)
Uh, I hate to break it to you, C-Guy, but neither Boeing nor LockMart nor NorGrumm would exist but for massive legal subsidies from the U.S. government. The Big Three are more like government design bureaux than private companies, with Boeing in the Mikoyan role, Lockheed as Antonov, and NorGrumm as Tupolev.
For that matter, the same is true for the major airlines (save perhaps Southwest). In todays business, regulatory and litigation environment aerospace development and certification is so expensive and risky that it has to be subsidized up front by the taxpayer. No group of shareholders can afford the risk of bringing a new aircraft to market nowadays.
And then there's direct cash subsidy. Congress bailed out the whole airline industry post-911. If it hadn't, we'd all be taking Amtrak today. (Hmm...) Speaking of rail, do you think railroads would have gotten the same sweet taxpayer cash if the terrorists had used a train to blow up, say, Grand Central? Hell no, they wouldn't've. Billions for big aerospace (and the motor freight industry) but not one dime for the railroads - that's our national transportation policy.
And of course there are the airports to consider. Airplanes require airports, and without taxpayer dollars every airport in America would be forced to shut down. (Railroads own and maintain their own infrastructure without government subsidy and still turn a profit.) And who builds and maintains the national navigation and air traffic control system? Uncle Sam, that's who. So much for the free market there!
Market, schmarket. There is no such thing as a free market in the aerospace business. Air transportation is essential to national security and national prestige, and no nation can afford to risk the loss of same due to the viccisitudes of the market. This is why Airbus is subsidized by the EU, and why Congress shucks out and will continue to shuck out massive moola to keep our own "private" aerospace industry afloat. The only difference between the U.S. and other countries of the world is that the other countries are simply more upfront about their government-sponsored aerospace industries and their government-owned national airlines.
All things considered, it might be more efficient (as well as more honest) if the U.S. were to go the same route and fold all the aerospace companies into one quasi-governmental body a la Airbus -- at least we could meet the Euros on a level field then. Call it BoeLockThrop.
As for the airlines, I suspect that 911 was their death knell. Ten years from now there will probably be just one major carrier -- AmericanDeltaSouthwest -- operating long-distance services (i.e. troop transport, coats-2-coast, and international routes) on government money, plus a bunch of small, privately-owned point-to-point air taxi services for civilian traffic. There is also a good chance that one or more operators will be offering hyper-fast travel via commercial suborbital spaceflight to the wealthy. In any case, it is only through quintessentially American-style innovations such as air-taxi services and commercial passenger spaceflight that we can hope to stay ahead of the Euros. The market is just too rigged.
Time will tell. But there will not be 1500 A380s built.
Any plane that carries that many hostages/targets wont be a big seller for long, IMHO...
Excellent point.
*sigh* Yeah. Want to start a dead pool? Or is that too tacky for even me?...
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