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Last Updated: Tuesday, 14 June 2005, 08:37 GMT 09:37 UK
Boeing fighting back at Air Show
By Jorn Madslien
BBC business reporter at the Paris Air Show

Airbus shows off the A380 at the Paris air show.

With fighter jets and executive planes buzzing around the giant Airbus A380, like flies and midges around a shire horse on a humid summer's day, it was the giant's dignified, slow ascent that made the greatest impression.

As the world's largest passenger plane took to the air at the Paris Air Show on Monday, onlookers at its competitor Boeing's chalets on the side of the runway were awestruck.

Boeing is entering the air show with tremendous momentum
Boeing spokesman Tod Hullin

"It's a great aircraft," said one Boeing executive, with others nodding in agreement.

But great engineering does not equate great economics, and this is why the US aerospace giant has so far failed to develop further its 747 Jumbo jet to meet the challenge from this European superjumbo.

Boeing has consistently questioned Airbus' ability to make money from the A380, insisting that the market for giant planes is limited to a maximum 400 aircraft.

Yet, with an anticipated 4.8% annual rise in air travel that is expected to send demand for commercial planes soaring to $2,100bn over the next 20 years, it seems Boeing is hedging its bets.

On Tuesday, Boeing International vice president Rinaldo Petrignani said: "Boeing will launch a new version of the 747 to counter the A380. Boeing has decided on the relaunch, with a larger version."

The right strategy?

So these days, despite all the publicity being directed at the big bird, there is a real sense of renewed confidence in the Boeing camp.

Boeing 787 Dreamliner
Boeing says it has many orders for the new 787 Dreamliner
"Boeing is entering the air show with tremendous momentum," says spokesman Tod Hullin.

The orders are coming in thick and fast for Boeing's commercial jets.

Ahead of the show, Boeing had landed about 100 orders more than Airbus, pushing its share price to a four-year-high in the process.

Take its new family of aircraft, the 787 Dreamliner medium-sized passenger aircraft, with project manager Mike Bair proudly declaring that he has landed 266 orders from 21 customers, or its larger 777-200LR Worldliner which completed its first intercontinental flight to arrive at the Paris show.

BA Boeing 777
Boeing is launching a long-range version of its popular 777
"Recent sales successes demonstrate that demand for the 777-200LR, the world's longest-range aircraft, is climbing," says program manager Lars Andersen.

To Boeing, the orders are seen as endorsements by international airlines that its strategy is right.

Boeing is betting that the future of flying will be point-to-point air travel, where passengers go directly from the airport closest to where they live to the airport closest to their final destination, even on long-haul journeys.

The 787 make this possible because they have a range of up to 15,700 kilometres, Mr Bair explains, and where that is not enough the 777-200LR steps in with its range of 17,445 kilometres.

Slow uptake

Boeing's competitor Airbus is not sitting on its hands, however.

Arriving late and looking flustered, having come straight from a meeting with President Jacques Chirac, Airbus' outgoing chief executive Noel Forgeard, had some good news too.

Airbus chief exec Noel Forgeard
Noel Forgeard: Orders are increasing
The orders for the Airbus A350 are also trickling in, though not at the same pace as for the competing 787, yet "we are at 90 orders" and this is "far more than what's needed" to go ahead with the project, Mr Forgeard says.

The problem for Airbus is that a trade dispute, under which the US has challenged the legality of launch aid given to Airbus, has caused a delay in announcing firm plans to build the A350.

Until recently an announcement had been expected at the Airshow.

Airbus now says it will make a final decision in September.

No winners

The trade row, which is being dealt with by the World Trade Organisation, could cause problems for both aerospace giants, according to Mike Turner, chief executive of BAE Systems, which owns 20% of Airbus.

US accusations that favourable start-up loans are illegal have been met with claims from Brussels that Boeing too is receiving unfair assistance. The case is escalating fast.

A Boeing 767 under construction
Boeing is hoping its 767 can win a US Air Force tanker contract
"It's a great pity," says Mr Turner, suggesting that although Airbus stands to lose a great deal, so does Boeing, even though the Americans do not seem to think so at the moment.

The suggestion is that the WTO might not only hit out at launch aid to Airbus, but also rule that the assistance Boeing receives by way of lucrative space and defence contracts is illegal.

Boeing insists this is not comparing like with like, since Airbus parents EADS and BAE Systems also receive defence contracts.

"There is as much or more support there," says Boeing executive Randolph Baseler.

Tanker contract

Boeing has an additional card up its sleeve. At the Paris show there is much talk about how the trade spat could hit Airbus' ambitions to re-enter the US defence market.

"If you subsidize your commercial products then don't come to the US to do business on defence," says John Douglass, president and chief executive of the Aerospace Industries Association, in an article in Aviation Week. "Airbus and EADS will find themselves frozen out."

It seems the US political process could be favouring Boeing, which is trying to re-win a giant contract for refuelling tankers from the US military with its 767.

The original Boeing contract was cancelled following a corruption scandal in the US and ever since then Airbus has been trying to break into the market and land the deal.

But Mr Douglass points out that we are approaching the run-up to next year's mid-term elections, ahead of the 2008 Presidential election.

"It will be very hard for Airbus to win a tanker with a US presidential race going on," he says.

Watch Airbus A380's first public display flight

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