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Archive for Saturday, October 7, 2000

Boeing battles with Airbus in commercial jet market

Fate of Boeing 747 remains uncertain

October 7, 2000

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— When airplane manufacturer Airbus Industrie announced that Singapore Airlines would buy 10 of its new A3XX superjumbo jets, Wall Street wondered whether it was the beginning of the end for the venerable Boeing 747.

Maybe, maybe not. While it's true that Boeing's 747 has new competition, the future of the A3XX is nowhere near certain. And in the meantime, Boeing's newest jet, the 777, has become increasingly popular for the long-haul routes that both the 747 and the A3XX are designed for.

In fact, the success of the 777 may foretell a change in the way airlines do business.

"The 777 is still more of a point-to-point aircraft, just over longer distances," said Cai Von Rumohr, an aerospace analyst for SG Cowan Securities. "You have to wonder, since you can go to and from cities that aren't hubs, how much you need larger planes that just go from hub to hub."

The 777 series, especially the extended-range and new, ultra-long range models, have been popular with many airlines. Since introducing the twin-engine aircraft in 1995, Boeing has received 496 orders for the 777, including 52 orders this year.

Boeing recently announced the longer range versions of the 777-200 and -300 jets. The new 777-200 will carry 301 passengers up to 10,195 miles 1,300 miles more than the existing -200 model. The new -300 variant carries 365 passengers up to 8,285 miles, a 1,400-mile difference from the standard -300 model.

The Airbus A340-500 and -600 were designed to carry more passengers for longer distances than earlier versions of the four-engine jet. However, Airbus, which positioned its A340-500 and -600 jets as alternatives to both the 747 and 777, has received only eight orders for the 380-seat -600 this year, and none for the 340-seat -500.

Lehman Brothers analyst Joseph Campbell said a drop-off after the initial orders of a new aircraft is nothing new. Most airlines haven't seen enough of the A340-500 and -600 to see how they might fit into their long-range plans.

"But the fact that the triple-seven has become so popular could make it an uphill battle for Airbus to compete with it," he said.

The battle for superjumbo jets has only made the competition hotter. Industry buzz now blesses the double-decker A3XX, which is expected to seat 555 passengers. However, a report this week from Credit Suisse First Boston cast doubt on Airbus' ability to recoup its investment in design and production, expected to be as much as $20 billion.

Boeing is Kansas' largest private employer with 16,500 workers in Wichita.

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