New plane lifts Boeing in contest for top seller

Tribune staff reporter

John Leahy, the indefatigable chief commercial officer of Airbus SAS, wasn't about to let a burst appendix prevent him from closing a crucial airplane deal.

His malady--"No doubt brought on by Boeing," he quipped recently--required emergency surgery.

Yet even from his sickbed, Leahy managed to help negotiate last week's deal to pump a $250 million loan into the US Airways-America West merger in return for a promise from the executives involved to help launch Airbus' newest plane--the A350.

"There are always cell phones," he said.

As the aerospace industry prepares for June's lavish Paris Air Show, the competition between Chicago-based Boeing Co. and Airbus has never been keener. After watching Airbus soar to the industry lead in terms of commercial jet orders and deliveries in 2003, Boeing has cranked up its sales machine and is leading a spirited recovery that is putting enormous pressure on Airbus.

Both companies are taking more risk, pricing more aggressively and doling out more concessions to customers to win business, sources say.

And this year Boeing is winning. It has collected 243 firm orders for its airplanes, led by its newest model--the 787 Dreamliner. Through April (the latest numbers available), Airbus had garnered only 145 contracts and is struggling to launch the A350, its 787 competitor.

Boeing this week converted commitments for 20 737s into firm orders from the leasing arm of Singapore Airlines. And Indonesian budget carrier Lion Air announced plans to buy 60 737s for $3.9 billion to replace its aging fleet of small, narrow-body jets. Those conquests come on top of critical recent wins at Northwest Airlines, Air Canada and Air India, among others.

"Boeing appears to be on a roll," said George Hamlin, a former Airbus marketing executive and now a consultant with MergeGlobal Inc.

By the end of this year, Airbus almost certainly will have delivered more airplanes, based on past orders, analysts said. But benefiting from the recent momentum for the 787, "Boeing will probably be ahead by a comfortable margin" in terms of new orders, said industry consultant Richard Aboulafia of the Teal Group.

Joseph Campbell, an industry analyst at Lehman Bros., thinks Boeing's rebound will bring the industry closer to the 50-50 parity that most experts believe is where things should settle out once the two manufacturers begin to deliver all the new airplanes they are selling.

"An invigorated Boeing sales team with a new airplane to sell is working hard to regain market share lost to Airbus," he told clients recently.

A year ago it was Boeing that was struggling for respect as the industry prepared for its annual air show. Despite assurances that it would sell 200 of its Dreamliners, the first commercial aircraft with wings and a body made of carbon-fiber composites, Boeing had sold only 50. Leahy's team, meanwhile, was spending most of its time telling anyone who would listen that the 787 would never get off the ground.

Over the past 12 months, however, Boeing has firmed up its manufacturing plans for the 787. It has replaced its top sales executive and has become uncharacteristically aggressive in pricing its planes, putting the onus on its manufacturing plants to come up with a way to build products more profitably.

"They're willing to absorb a lot of risk to get an edge," said Aboulafia.

Top executives, led by Boeing Chairman Lewis Platt and commercial chief Alan Mulally, have ventured into the field to support their sales team as never before. As Boeing searches for a new chief executive to replace Harry Stonecipher, who in March lost his job to a sex scandal, sources close to the company say the performance has burnished the star of Mulally, who is on the short list for the job.

Boeing never reached the 200-order threshold for the 787 by Dec. 31. But by this week it had collected 118 firm orders for the plane, and customers had announced intentions to buy 143 more, although some of those are from questionable sources, like Primaris Airlines, an unfunded start-up.

Boeing also has prodded the U.S. government to launch a vigorous challenge to the government subsidies Airbus receives from its European partners, a challenge that soon could explode into a full-blown trade war before the World Trade Organization. The aim: to prevent Airbus from using government money to launch its A350.

That puts heavy pressure on Leahy to demonstrate at Paris that the A350 is for real.

Airbus' new plane began as a retrofit of the company's highly successful A330-200, which over the last several years has almost driven Boeing's 767 out of business and created the need for Boeing to push the technological envelope with its Dreamliner. But over the months it has morphed into an almost new plane with composite wings, less weight, a wider fuselage and more efficient engines.

Leahy's challenge is to win enough orders for the plane to convince Airbus' board to launch it. The announced cost of the project is $5.3 billion. But Aboulafia echoes a popular view when he says that Airbus likely will have to spend more given all of the A350's new enhancements.

Leahy is undaunted. So far he has 10 commitments from a Spanish airline and probably twice that many from the US Airways deal. But last week he promised that he would have 100 orders from four customers by the Paris show, not including US Air. Leahy won't confirm it, but a leading candidate could be Los Angeles-based International Lease Finance Corp., which Airbus has been courting assiduously this year.

"The big splash will be at the air show," Leahy said last week.

But as Boeing discovered last year, promises in aerospace are often hard to keep.


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