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Last Updated: Wednesday, 4 January 2006, 23:12 GMT
Aerospace giants set to enter arena
By Toby Poston
BBC News business reporter

The world's two large commercial jet makers have entered 2006 with bulging order books, but the new bosses at Boeing and Airbus will not be popping champagne corks just yet.

Both planemakers will spend much of this year ramping up production to complete these orders, while at the same time pouring money and man-hours into the further development of key new models.

Full order books
Airbus' A350 and Boeing 787 Dreamliner jets
2005: Boeing landed 870 orders for large aircraft
2005: Airbus landed 779 orders for large aircraft

What they will want to avoid is delays.

Neither Boeing or Airbus can afford to upset important customers or incur the resultant financial penalties.

Meanwhile, flashing in the background like a "Fasten Seat Belts" sign is the ongoing worry of a costly trade dispute.

Record sales

The current buying spree by airlines is partly explained by the growing fleets of budget, Middle Eastern and Asian airlines.

But it is also due to the launch of some long-awaited new models by the two rival aerospace giants.

The biggest new entrant last year was the Airbus A380, a 555-seat double-decker that finally posed a serious challenge to Boeing's 35-year dominance in the market for very large commercial jets flying between major hubs across the globe.

The Toulouse-based aircraft maker - which is 80% owned by the pan-European aerospace giant EADS and 20% owned by Britain's BAE Systems - has announced 149 orders for the plane, capable of holding up to 840 passengers.

Uptake for the A380 has been somewhat slower than Airbus would have liked, and it has upset many of its customers with a six month delay in delivery, yet the plane maker still enters 2006 confident that it will hit the 300 sales it needs to break even.


US arch-rival Boeing, meanwhile, has stolen a lead in the long distance point-to-point market with its 787 Dreamliner, due to enter service sometime in 2008.

The 250-seat plane has already clocked up more than 300 orders.

But Airbus is gearing up to compete in this market with its new A350, a medium-sized rival to the 787 Dreamliner.

Boeing, meanwhile, is extending its flagship 747 jumbo jet into a 450-seat competitor for the A380.

Scandals and infighting

Meanwhile, the boardrooms at both companies enter 2006 after a year disrupted by scandals and infighting.

James McNerney is six months into his role as Boeing chief executive.

Staff and shareholders will be hoping that he lasts longer than his two predecessors who were ousted within the space of 18 months.

McNerney replaced Harry Stonecipher, who had been brought in to clean up the company after the contracting scandals that put two Boeing executives in jail and led to his predecessor Phil Condit resigning.

But Mr Stonecipher didn't last long, sacked after an inquiry into a personal relationship he was having with a female executive at the firm.

Airbus also has a new management team that is finding its feet.

New co-chief executives Noel Forgeard and Thomas Enders will want to draw a line under the months of infighting between French and German shareholders over who should run both Airbus and EADS, the company that controls 80% of Airbus.

Thomas Enders (left) and Noel Forgeard

Six people in Geneva

Executives on both sides of the Atlantic will have one eye on Geneva.

Years of cut-throat rivalry has finally spilled over into what promises to be a long and costly court case.

In early March, two World Trade Organization dispute panels will begin wading through depositions from US and European Commission trade representatives.

Each side is determined to end what it feels are massive subsidies being offered to the rival civil aircraft makers.

The US initiated the dispute, alleging that Airbus has received at least 13bn euros ($15bn; 9bn) in illegal launch aid from France, the UK, Germany and Spain, helping it to overtake Boeing as the world's biggest aeroplane maker.

It wants to prevent European governments offering aid, in the form of loans repayable on future sales, for Airbus' A350, its rival to Boeing's new 787 Dreamliner jet.

EU officials have countered with claims that Boeing has been allotted $23bn (13bn) in subsidies since 1992 in the form of research and development assistance from US government agencies.

US Trade Representative Rob Portman, left, and EU Trade Commissioner Peter Mandelson
The US and EU are at loggerheads over aeroplane subsidies

The European Commission admits the legal dispute will be costly, not least because both sides may well have to reveal market sensitive information on things like aircraft prices.

It says it wants to negotiate, and has offered to cut launch aid for the new A350 by a third, and to delay paying it.

So far, the US has been unwilling to compromise, and seems happy to let the WTO dispute take its course.

One possible way forward would be that the dispute fell into the convenient "deep freeze" of a lengthy WTO dispute panel investigation, leaving the two airplane makers free to focus on delivering all the new planes they have sold.

But as everyone who works in the aviation industry knows, the turbulence could reappear at any time.


SEE ALSO:
Airbus v Boeing: The next battle
26 Apr 05 |  Business
EADS finally names its new bosses
26 Jun 05 |  Business


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