Monday, August 22, 2005

Boeing owes something to Airbus.

Business: When Airbus was kicking its butt, it finally woke Boeing up to slim down, be more pro-active in its designs and business dealings. Now it seems that is working out with oil prices going higher, Airbus is getting caught up in a sorta perfect storm.

TOULOUSE, France - Airbus SAS has struggled for 20 months to design an intercontinental jetliner to compete with Boeing Co.'s fuel-saving 787. In that time, oil prices have more than doubled and Boeing picked up 185 orders for its jet. Airbus, based in Toulouse, needed three redesigns to come up with a plane it says will cost 4 percent per seat less to fly than the 787. The world's biggest commercial aircraft maker, already spending more than $16.4 billion to develop three other planes, said it will need to invest an additional $5.4 billion to bring the A350 to market. "They need to build it," said Klaus Breil, a fund manager at Adig Investments in Frankfurt, Germany, who helps oversee $6 billion of assets, including shares of Airbus parent European Aeronautic Defense & Space Co. "If they don't, they'll leave this market completely to Boeing." Advertisement ....Airbus initially balked at matching the 787 as it poured $14.5 billion into developing the 555-seat A380 superjumbo, which is intended to reduce traffic at increasingly crowded hub airports. In June, Airbus said deliveries of the A380 would be delayed by six months because of wiring problems in the passenger entertainment system. Airbus plans to ship the first A380 next year, with a cargo version scheduled to enter service in 2008. Airbus also is developing the A400M military transport, which will be delivered to seven countries beginning in 2009. ....The A350 project may strain Airbus' engineering resources, said Mike Turner, chief executive officer of BAE Systems. "Whether we launch it is a question of making sure we have the resources available," Turner said. Airbus plans to hire about 2,500 workers, including 1,000 engineers, said spokesman David Voskuhl. Hiring engineers creates long-term costs for Airbus because European laws make it difficult for the company to dismiss employees, particularly highly skilled workers, said Nick Cunningham, an analyst at Panmure Gordon in London. "It implies you have to create a fixed-cost base that's probably larger than you ideally like," Cunningham said.

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