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Last Updated: Monday, 25 April 2005, 23:06 GMT 00:06 UK
Market challenges facing Airbus' giant
Analysis
By Jon Cronin
BBC News business reporter

Superlatives often surround any mention of the Airbus A380 passenger jet.

Artist's impression of an A380 in flight
Airbus is bullish about the A380's commercial prospects

France's President Jacques Chirac has described the giant plane as the "crowning achievement of a human and industrial adventure", while Britain's Prime Minister Tony Blair has dubbed it "the most exciting new aircraft in the world".

When the double-decker A380 takes off for its maiden flight - weather permitting - across the skies of France on Wednesday, it will certainly be the world's largest passenger airliner.

But does Europe's flagship commercial jet, which is due to come into service next year, have what it takes to be a financial success?

Airbus clearly thinks so.

The Toulouse-based aircraft maker, which is jointly owned by pan-European aerospace giant EADS and Britain's BAE Systems, is bullish about the A380's commercial prospects.

Dominant player

Airbus says the jet will carry more passengers, in greater comfort, and over greater distances, than any other passenger plane - in particular Boeing's 747 jumbo jet.

Airbus will be reined in on the price it can charge because there are new and second-hand alternatives that airlines will look at
Tim Coombs, Aviation Economics

It also points to fuel efficiencies offered by the A380, and says it is comfortably on track to meet a break-even sales target of 250 aircraft, with 154 orders secured so far.

Arch US rival Boeing, which recently lost its position as the world's top passenger jet maker to Airbus, has countered with its own vision of the future.

It is busy developing its smaller, long-range 787 'Dreamliner' aircraft, which will carry about 250 passengers (far fewer than the A380's 555 to 840 seats), but promises fuel savings of 20% compared with similar mid-sized planes.

Budget overruns

Boeing argues more passengers will want to fly between smaller regional airports, rather than the select giant hubs required to service A380s.

"The A380 could be a disaster," says Boeing's former boss Harry Stonecipher, pointing to the commercial flop that was the Franco-British built Concorde.

Boeing 747
Boeing has yet to say if it will challenge Airbus with a larger 747

But while the A380 is unlikely to suffer the fate of its supersonic predecessor - only 14 Concordes ever went into service - Airbus still faces a number of challenges.

The A380 project is running vastly over budget. In December, Airbus admitted the plane's development would cost an extra 1.45bn euros (1bn; $1.9bn), bringing the overall cost to about 12bn euros.

Airbus has received billions of euros in 'launch aid' - loans to cover a third of the development costs - for the A380 from European governments, and the company insists it will still make a 20% return on its investment.

"That sounds like an ambitious target, when you consider the industry average is 10% to 12%," says Tim Coombs, managing director of airline industry consultants Aviation Economics.

Airbus predicts it could sell in excess of 700 A380s during the estimated 30 to 40-year lifespan of the aircraft.

'Wait-and-see'

Some 15 airlines have so far ordered A380s, but Mr Coombs says the attitude of other carriers remains more sanguine, as they struggle to deal with rising fuel costs and cutthroat competition.

"There are some airlines that are taking a wait-and-see attitude," he says.

A380 IN FIGURES
Length: 73m
Wingspan: 79.8m
Height: 24.1m
Typical capacity: 555
Max capacity: 853
Engines: 4
Max range: 15,000km
Cruising speed: 0.85 mach
List price: $285m
Orders so far: 154 ($44bn at list prices)
Orders to break even: 250 ($71bn at list prices)

Boeing has yet to announce whether it plans to take on Airbus directly for a slice of the so-called 'superjumbo' market, with a revamped version of its own 747 jumbo jet.

However, the booming market in second-hand aircraft - which are available at a fraction of the cost of the A380's $285m list price - could still divert the interest of some potential customers.

"Airbus will be reined in to a degree on the price it can charge for an A380 because there are new and second-hand alternatives that airlines will look at," says Mr Coombs.

Older passenger jets - while cheap - are often noisier and less fuel efficient than later models, though.

And while analysts wait to see if the superjumbo market will fully take off, few doubt that Airbus will be able to hail the A380 as an aviation industry success story.

For Europe's political and business elite, too much is at stake for any other conclusion to be acceptable.

But whether the A380 will be a money spinner, only time - and more orders - will tell.


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