More turbulence ahead for Airbus

By Robert Plummer
BBC News business reporter

The business outlook for Airbus could be stormy

Airbus certainly stole a march on its great US rival Boeing last Thursday when its A380 super-jumbo jet made its first landing at London's Heathrow Airport.

The flight was an impressive publicity coup for the makers of Europe's flagship commercial jet.

The level of public interest generated is clear from the fact that it was the day's most-read story on this website, accessed by more than a million users.

However, the prospects for Airbus are not all as rosy as last week's headlines would suggest.

The double-decker A380, the world's biggest passenger jet, has a good tailwind behind it at present. But the planemaker's other new product, the A350, is finding the going a great deal choppier.

While the A380 seats between 555 and 840 people, not every airline wants or needs such a behemoth, especially if it serves regional airports that are simply too small to accommodate it.

Airbus is struggling in a crucial market segment

As a result, Airbus came up with the mid-sized A350 to counter Boeing's new 787 Dreamliner, intended to carry 250 to 300 passengers.

But before the first plane has rolled off the production line, Airbus has had to go back to the drawing board for what some insiders say will be a dramatic redesign.

"It's going to be a complete revamp - a completely new aeroplane," says David Learmount of Flight International magazine.

Behind Boeing

Since the A350 was announced in 2004, Airbus has managed to book 100 orders for the plane.

But sales have not been as strong as hoped and analysts say the plane has suffered because it is based heavily on the existing A330 jet, rather than being designed from scratch like its Boeing counterpart.

Air industry analysts have been unenthusiastic about the A350, describing it as "derivative" and "almost an afterthought".

Worse, it has failed to dent Boeing's dominance in the mid-sized market. Between them, Boeing's 787 and 777 jets outsold the equivalent Airbus product range by a margin of 10 to one last year.

Boeing's Dreamliner is set to arrive two years before the A350

Last month, Singapore Airlines' chief executive, Chew Choon Sing, spoke for many in the industry when he said that since Airbus had come up with new wing, tail and cockpit designs for the A350, the firm "should have gone the whole hog and designed a new fuselage".

In response to the criticisms, Airbus boss Gustav Humbert has said changes are still being looked at.

Flight International's Mr Learmount believes Airbus has no choice.

"Airbus is basically just accepting what's going on out there," he told BBC News. "Its customers are saying, 'Don't try and repeat the A330. Let's have something new. We want something a bit bigger and don't go for the same fuselage.'"

'Undefined'

According to Flight International, the most important change planned to the A350 is a move from the four-engine Airbus design for big, long-range aircraft to the adoption of very large twin engines.

"Boeing can successfully operate long-haul, very big aeroplanes on two engines and it makes more economic sense," says Mr Learmount.

Airbus has not confirmed the reports of a wide-ranging revamp, saying merely that all will be revealed by July.

But the uncertainty is starting to unsettle those who had signed up to the original version, with the biggest client for the plane, Qatar Airways, apparently having second thoughts.

Last year, the airline signed a letter of intent to buy 60 A350s. But in an interview with Reuters news agency, Qatar Airways' chief executive, Akbar al-Baker, has cast doubt on the deal.

Mr Baker told Reuters that the airline could not purchase a plane that was "undefined" and would have to review its options.

"So many things will change that the aeroplane that we signed for last September is not there any more," the agency quoted him as saying.

Even before further changes were mooted, the A350 was not due to take to the skies until 2010. And if Airbus is now going back to basics for a radical re-think, the plane's arrival is likely to be postponed until 2012, analysts say.

The trouble is that Boeing's Dreamliner has a head start on the A350, since it is due to enter service in 2008 - and already has 291 firm orders.