Airbus risks losing market dominance

A new Airbus A380 in the paintshop. Airlines have ordered nearly 160 but deliveries are a year behind schedule. Picture / Reuters

LONDON - Airbus, buffeted by delays with its signature A380 superjumbo that triggered the ousting of its chief executive this week, risks losing its position as one of the two dominant planemakers.

European Aeronautic, Defence & Space, which owns Airbus, also replaced one of its co-chief executives after saying wiring bottlenecks in the A380 may cost it €2 billion ($4.1 billion) by 2011. In addition, Airbus has fallen behind Boeing in the race to offer a fuel-efficient 250 to 350-seat plane.

Delays in the US$13 billion A380 programme have prevented management from focusing on a competitor for Boeing's mid-size 787. Without a plane in this category, Toulouse-based Airbus would cede a market estimated to be worth US$450 billion over the next 20 years to Boeing.

"Airbus is at risk of becoming a marginal, niche manufacturer in a couple of years unless it acts now," says Richard Aboulafia of Teal Group, a Virginia consulting firm.

This month, EADS named French aerospace veteran Louis Gallois, 62, to replace Noel Forgeard as co-chief executive. Christian Streiff, a former executive at glass-maker Saint Gobain, takes over from Gustav Humbert as chief executive of Airbus.

"There's not much time left," says Peter Rieth, an analyst at BHF-Bank in Frankfurt. "The new chief executive officer primarily has the task of bringing the problems in the company back on track, especially with the A380.

"That means not delaying deliveries any further and making strategic decisions such as how things will continue with the A350 [the competitor for Boeing's 787]. These are two huge challenges."

There is precedent for the decline of a dominant planemaker.

McDonnell Douglas, once the world's largest aircraft-maker, failed to invest in new planes and its product line was whittled down to one 300-seat model, the MD11, and a 140-seater, the MD90. It was swallowed by Boeing in 1997, after Airbus established itself as a competitor.

Doug McVitie, managing director of Arran Aerospace, a consulting firm, says airlines may support Airbus because they need two strong planemakers to keep prices in check.

"Most of the major airline bosses would hate to see a duopoly become a monopoly."

Chicago-based Boeing won gross orders for 358 planes in the five months to June and delivered 160 aircraft. Airbus has orders for 105 planes and delivered 179 in the same period.

An EADS spokesman said yesterday that more management changes were being considered but the first priority would be fixing the A380 programme, which was at least a year behind schedule.

Sixteen customers have ordered 159 A380s, a 555-seat plane that has a list price of US$300 million.

EADS lost a quarter of its market value on June 14 after saying delays in the A380 would reduce operating profit by €2 billion by 2010. Its shares have dropped 37 per cent to €22.28 since March 24.

- BLOOMBERG