What is all the fuss about the 787 vs. A350 and the A380 vs. 747-8? Guest Commentary : Based on everything Boeing and Airbus have done over the past 36 years, is there any serious doubt in anyone's mind, that Airbus will come up with an all new A350 this summer and that Boeing will soon offer the 787-10? And when Airbus does, is there any doubt that it will, by definition, be "a better mousetrap" compared to the existing 787-8 & -9 models? Airbus will do this for no other reason than that they could put the whole Airbus venture into jeopardy, if they do not. The spectacular, but unexpected early successes with the 787 during the past couple of years, and more recently of the 777, even to the folks at Boeing, have pretty much destroyed the markets for both the A330 and A340. In spite of the arrogant remarks by Airbus COO John Leahy that he was not worried about the 787 when it was launched (Boeing officials have not been innocent in this field, either), Airbus top management always maintained publicly, and for good reasons, that they would continue to modify and improve their top-selling 767 killer, the A330, and come out with an all new aircraft, if the "derivative A330" approach would prove to be insufficient to keep the 787 at bay. That time has clearly come. Airbus was also severely handicapped during the past four years, because of a serious shortage of engineering manpow er, with both the A380 and the A400M under development, as well as the financing aspect of the A350. This forced Airbus to follow a slow development path with the A350, hoping that a majority of the airlines would wait until Airbus was ready with a competitive proposal, to avoid being forced to make a decision based on a single proposal. It appears, that several key airlines, such as Singapore, have done so, even by giving up earlier 787 delivery positions. With almost all of the engineering work on the A380 now behind them, Airbus is expected "to do whatever it takes" to catch up and be able to offer the all new and better A350 at the Farnborough Air Show in July or before, for delivery in 2011, at about the same time Boeing will be able to deliver the comparable 787-10, if it is launched as expected. The European government shareholders in EADS have apparently recognized that launchin g an all new A350 has become an absolute necessity to protect their previous investments in Airbus and to enable them to effectively compete with the 787. Airbur has sought, but as yet has not drawn down, government guaranteed loans for 33% of the development cost of the A350, as agreed to under the 1992 agreement with the US. Irrespective of the outcome of the new dispute with the US over so-called "subsidies " to Airbus, now under review by the WTO, Airbus has announced that they will start digging into these funds already allocated for the A350, based on the European interpretation of the 1992 agreement between the US and Europe, if a negotiated settlement of WTO complaints is not reached. The recent comments from Steve Hazy of ILFC, Singapore Airline management and others in the airline industry urging Airbus to come out with the all new A350, therefore, not only reflects their desire to have Airbus develop a competitor to the magnificent 787, but also because they have the confidence that Airbus will be able to produce such an aircraft, or be forced to abandon the A330/A340 markets, a situation none of the airlines, the aircraft leasing companies, or Airbus, can afford. There is another very interesting aspect to the above, often overlooked and I believe not sufficiently recognized or acknowledged by Boeing manageme nt. Historical examples confirm that there is a substantial advantage for a manufacturer to be the second one to come out with a new aircraft in a certain category, providing one is not too late, as Convair was with the 880. Boeing was able to take advantage of this opportunity when it developed the 777 and was, therefore, able to come out with a much better airplane compared with the MD-11 and A340, or they would have kept their money in their pockets. By design or by accident, Airbus is now in the same position with the A350 Boeing was in when it developed the 777 in 1991. With regard to the A380 vs. the 747-8, I believe Boeing is again making a big mistake by underestimating the market potential for a very large aircraft. Boeing argues that Airbus erroneously expects to sell as many A380's during the next 20-25 years as Boeing sold 747s during the past 40 years, or roughly 1,500 aircraft. I believe Boeing may be proven wrong, for the following main reasons: 1. The principal claim by Boeing is that the A380 is too big because of "the point to point" services to be operated by the 787 and A350. 2. If that was the case, why did Boeing make two desperate attempts to block the A3XX from getting launched, first with the 747-500/600 and the 747-XSTR, and now with the 747-8, all having a capacity within 10% of the one of A380, while the 747 was 300% larger compared to the 707/DC-8s it was replacing? 3. More than half the world population in China, India and Indonesia had essentially not flown until a decade ago, while the growth rates in those countries since has been at about 16%, triple the rate experienced in the "developed world" during the past 40 years. Furthermore , the growth rates in the Pacific are expected to continue at a much higher rate compared to the rest of the world, for the foreseeable future. 4. The A380 was designed to cope with airport congestion as a result of the massive O & D traffic increases forecasted between the big hubs for the foreseeable future, especially in the Pacific basin area. This forecast takes into account the reduction in traffic at the big hubs as a result of the acknowledged increases in point to point services between smaller hubs. 5. Even though international airline agreements have completely changed with the proliferation of open-skies agreements, the fact remains that only a small portion of all future airline travelers will need to travel from one small city in the world to another small city on the other side of the globe. Instead, they will either want to go from one small city to a big hub on the other side, or vice versa, making the requirements for extremely long range aircraft relatively small compared to the bulk of all traffic, which will be flown within or between neighboring continents. 6. Based on personal experience, having flown the longest scheduled flight in service today, the 18 hour Los Angeles-Singapore flight on an A340-500 with Y- class seats at a 36 in. pitch, I do not believe that many passengers will be prepared to be pinned down for 20 to 22 hours at a 30 to 31inch seat pitch. Furthermore, there is the law of diminishing returns, which causes extremely long-range aircraft to carry excess amounts of fuel instead of payload during the early phase of the flight in order to reach their destination . This is the reason why the A340-500 is payload limited on the above flight and is, therefore, not offering the 36 inch pitch in Y-class to please the passengers but because of the heavy fuel load, not the most part workable way to fly. 7. Most Y-class travelers and some business travelers today get on the Internet or have their secretaries do it, to find the lowest fare, irrespective of the airline or aircraft type offered and will select the lowest fare, even if they have to make one or two stops. 8. Conclusion: There will be a strong requirement for both large and small aircraft like the 787, A350 as well as 777s, 747-8 and A380s, mainly driven by the phenomenal growth rates in the Pacific basin, for many years to come. Is it possible, however, that both Boeing and Airbus, as well as those airlines which have already ordered either the 787 or the A350, have overestimated the market requirements for these extremely long range aircraft? Everyone in the industry must agree that the above developments are extremely healthy for the airline/aircraft industry and the remaining two large commercial aircraft manufacturer s. Remember , the second generation 707-320 was the most successful airplane in its category and put Boeing solidly on the commercial aircraft market, not only because it was a Boeing-built airplane, but also because of the fierce competition Boeing faced from the Douglas DC-8. By Rudy Hillinga, May 2, 2006. Hillinga is a frequent Guest Commentary contributor to Leeham.net. He was employed by Boeing as a salesman in Asia and Europe, retiring after 33 years.
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