Word: airbus
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Boeing's taunts obscure the quiet transformation of Airbus from a sort of pan-European employment agency to a savvier, profit-driven company. The 30-year-old manufacturer was the first to introduce a sophisticated fly-by-wire system (where the pilot's actions send electronic signals, rather than pulling cables, to maneuver the plane) and adopt virtually uniform cockpits for its entire fleet (thereby lowering the cost of pilot training). And Airbus often sells its jets for less than comparable Boeing models. "I'm a red-blooded American, and I want to see our side succeed," says David Neeleman...
That doesn't make Airbus the market leader, but the company has lately mastered the knack of acting like a winner. An Airbus marketer derides the 747 as a "bone shaker." And Leahy has no qualms about going for the jugular. "The A380 will be a new flying experience," he says. "That's what the 747 provided in 1970." He maintains that airlines will probably install casinos, gyms or duty-free shopping in the A380's abundant cargo hold. Joseph San Pietro, an analyst at Dresdner Kleinwort Wasserstein, dismisses such a notion as a flight of fancy...
...customers such as Singapore Airlines, Virgin and Qantas are reportedly buying the A380 for as much as 40% off the original list price of $235 million--compared with $215 million for the biggest version of the 747. To recoup the $10.7 billion it will expend to birth the A380, Airbus must sell 250 of them in five years. "The company has an awful lot of eggs in that basket," says Paul Nisbet, an industry analyst at JSA Research in Newport, R.I. "The A380 will live or die on its own sales...
...will it? "Airbus receives success-dependent, low-interest loans from European governments," says Dorothy Robyn, an economist who worked in the Clinton Administration. "Essentially that means Airbus has no bottom line." Britain, Germany, Spain and France will lend Airbus a third of the development costs at close to market rates. The loans don't have to be repaid if the project fails. That kind of cushion, critics charge, guarantees the A380 a soft landing. Boeing gets indirect handouts through its lucrative U.S. defense contracts. Last March, for example, the Air Force floated a plan to encourage private carriers...
...innovation is as dramatic as Boeing's newest plane design. Just a few short months ago, Boeing went begging for someone to buy its concept of a stretched 747. It landed zero orders, in contrast to 60-plus to date for the A380. Humiliation begat inspiration. "Airbus forced a conversation about, 'Is this really where we want to go?'" says Alan Mulally, head of Boeing's commercial division. The face-saving answer was no. Adds Mulally: "We concluded that the sweet spot is in the midsize range...