IBS

AS BEFITS an event in its back yard, the Paris Air Show has brought good cheer for Airbus. As the show opened on Monday June 18th, the European jetmaker announced a raft of new business. It says it has gathered new or confirmed orders and more tentative commitments for 339 planes with a list price of $45.7 billion, beating previous air-show records.

The news brought little more than a disdainful response from Boeing, its arch-rival. The American firm chooses not to save up news of big sales for set-piece events, although it did announce on Tuesday June 19th a deal for 60 planes worth some $8.8 billion. Before that, totting up orders for the year so far, Airbus and Boeing were at roughly the same level of over 400 orders apiece. Airbus, which had slipped behind its transatlantic competitor over the past couple of years, may be starting to catch up again.

Not all is rosy for Airbus. The company expects to suffer a loss this year, just as it did in 2006. The main reason for Airbus’s ongoing troubles is also one of the star turns at Paris—the A380 superjumbo. It is destined to become as readily recognisable as Boeing’s hump-backed 747, another plane that saw a far from comfortable birth. Production delays have pushed back its entry into service by two years to October which, along with the strains of the weak dollar, is responsible for Airbus’s losses. Yet Airbus might hope that the worst is over for its 555-seat monster.

A clutch of new orders in Paris suggests that the A380 will eventually start to pay. Emirates, a Gulf-based airline and the first to take the plunge with the vast aircraft, has agreed to buy another eight planes. Qatar Airways wants another three. But the delays are hitting Airbus’s bottom line. The European firm admits that it needs to sell more than 420 planes just to break even. So far orders are around 170 and growing slowly. But even Boeing admits that the market for passenger jets with over 400 seats should top 960 over the next 20 years.

Just as important to Airbus is the fate of its A350-XWB. This long-haul, wide-bodied jet also caused much grief last year. Customers turned up their noses at its original design. In contrast Boeing’s competitor, the 787 Dreamliner, has grabbed some 660 orders. Airlines wanted Airbus to match the advantages offered by Boeing’s new composite body. This lighter and more rigid material allows a larger fuselage and greater fuel efficiency. But redesigning the plane will cost Airbus some $10 billion.

Before Paris, Airbus had managed to extract just a handful of orders for this plane. Now, in a day, it has amassed 127 firm orders and caught the eye of other airlines. Huge discounts must surely have been offered, yet the interest also reflects booming demand for passenger jets. Airbus expects sales of around 22,700 new passenger and freight aircraft up to 2025. Both firms have bulging order books. The 787s ordered today will not start to roll off production lines until 2014, the year that the A350 should enter service, making more of a straight fight for future business.

In a periodic plea for more state aid Louis Gallois, Airbus’s boss, says that the firm was in “the worst state it has ever been”. But Airbus is restructuring and may be past its darkest days. Nicolas Sarkozy, the new French president, also seems keen to break the political stalemate with Germany that is hobbling EADS, Airbus’s parent company. Airbus is beginning to copy Boeing’s practice of outsourcing production and sharing risk with partners.

The rivalry with Boeing will continue, not least because the strong euro could force Airbus to turn to suppliers in dollar-denominated regions, reigniting political warfare. But another rival may be on the horizon. China’s leading state aerospace firm says that it will bid for six plants that are being auctioned off as part of Airbus’s restructuring. The Chinese firm has also signed important deals with Bombardier, a Canadian company that makes smaller regional jets but could have bigger ambitions. Jim McNerney, Boeing’s boss, admits that “There is room for a third large planemaker in the next two decades,” and that China is the likely source.