Rivals in the air

Boeing once bet the firm on the 747, now it's Airbus' turn with the A3XX

The rivalry between Boeing and Airbus goes back a long way, when Boeing was by far the dominant supplier of commercial airplanes.

The European countries that set up the Airbus consortium were concerned that no single company could rival the American giant, and set about building a viable European competitor. When Airbus was set up in 1970, European manufacturers produced only 10% of all commercial aircrafts despite having one-quarter of all airline business.

Boeing's successes included the world's best selling jet, the short-range 737, and the largest and most profitable, the 747 jumbo-jet.

To counter Boeing's market dominance, the European consortium adopted an innovative approach to design, pioneering the fly-by-wire control technology and introducing a common cockpit across its whole range.

But it found it hard to break into the American market, and for the first few years its mainly sold to other state-owned European carriers.

Its commercial operations were also hampered by the loose nature of the relationship between the partners, Germany's DaimlerChrysler Aerospace (Dasa, a subsidiary of what was then Daimler Benz), France's Aerospatiale Matra, Britain's British Aerospace (now BAE Systems), and Spain's Casa.

Boeing objected that the new company was being unfairly subsidised, and the acrimonious dispute dogged EU-US trade talks for years.

Airbus hopes the matter will be resolved now that Aerospatiale Matra, Dasa, and Casa are merging to form the European Aerospace, Defence and Space Company (EADS), and as the consortium is turning itself into a proper commercial company.

Breaking into the US market

Airbus' success depended on introducing new technologies like fly-by-wire

Gradually Airbus began to penetrate the US market, winning its first orders from the now-defunct Eastern Airlines in 1979. In the past few years it has built up a strong customer base among three major US airlines, Northwest, United, and US Airways. The latter set a record in 1996 when it ordered planes worth $6.3bn from Airbus, including 124 A320s, an order which it increased by a further $3.7bn on 2 July when it ordered 30 wide-bodied A330s.

In 1998 Airbus received 556 firm orders for new aircraft worth $39bn, up from 460 orders worth some $30bn the previous year, claiming a 50% market share.

During 1999, the European consortium was even more successful, recording 476 commercial airline orders, while Boeing received just 391.

Now there are two

As Airbus grew, the US commercial aircraft business was consolidating. Boeing's rivals simply dropped out. Lockheed, who made the Tri-Star, has concentrated on military production for years, while the other main US company, McDonnell-Douglas, was taken over by Boeing for $13bn in 1997.

And within Europe, smaller aircraft manufacturers like Fokker have gone to the wall, while British Aerospace sold off most of its remaining commercial aviation division to Bombadier, the Canadian regional jet manufacturer.

Bottlenecks at Boeing

Boeing was plagued by production problems in the late 1990s

During recent years, Boeing has been hampered by difficulties in fulfilling its bulging order books.

It was forced to take a $1.6bn loss in the fourth quarter of 1997 after shutting down its production lines for a month to catch up on bottlenecks.

This was followed by a sudden collapse in sales in the wake of the economic crisis in Asia, when many airlines failed to confirm their orders after they saw their passenger numbers nose-dive.

Differing views of the future

The two rivals are pursuing different strategies in terms of aircraft design in the future.

Airbus has now confirmed plans to build a new larger plane, the A3XX, which can carry up to 656 passengers in a double-decker configuration.

The European plane maker is betting that, as landing slots at airports are getting scarce, airlines will want to pack as many people as possible in their planes.

Customers, meanwhile, will be attracted by the extra space and comfort available.

According to EADS estimates, there will be demand for 1,500 A3XX over the next two decades, with the first planes delivered by 2005.

Boeing on the other hand says its research shows that demand will be mainly for small to medium size aircraft, and is concentrating on updating its 737s and medium range twin-engine planes so that they can fly longer ranges.

Instead, Boeing wants to modernise its successful family of 747 jumbo jets, and might build a stretch version of the 747, if enough airlines are interested.

It is also more pessimistic about the effects of the Asian crisis on demand, which it says will reduce aircraft purchases by 8% in the next 10 years.

And the winner is ...

Up until 1997, Boeing was the clear market leader on the passenger airplane market. Now the situation is less certain, as Airbus has overtaken its American competitor.

But if Airbus' multi-billion dollar gamble on the success of the A3XX fails, Boeing could easily become the dominant force in the world's skies again.