In the race between Airbus and Boeing for global dominance of the skies, the European giant has made the first move against its arch rival.
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Last Updated: May 11, 2011
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The big two will try to outsell each other and grab the lion's share of a US$1 trillion (Dh3.67tn) market for new aircraft.
An estimated 12,000 single-aisle jets, such as the Airbus A320Neo and the Boeing 737, will be bought by airlines worldwide by 2030, so the stakes are high.
Airbus has made an impressive start with a new version of an old favourite. Launched in December, the A320Neo short-haul jet has become the newest plane on the block.
The aircraft offers airlines new engines to produce a more fuel-efficient jet with its Pratt & Whitney geared turbofan or CFM International's Leap-X.
In response, major global airlines have handed Airbus more than 330 orders. Officials say they are on track to break the 500 mark in the first six months of sales, culminating in the Paris Air Show, where it traditionally showcases its latest deals.
One could be from a Middle East airline, with Qatar Airways announcing last week it is considering a Neo order at the show.
"The Neo is living up to expectations, and the expectations are pretty high," says Alan Pardoe, the head of marketing communications at Airbus. "By any reasonable measure selling 500 [aeroplanes] in the first six months is a success."
In the past week, ILFC, a major US aircraft leasing company, reported it would spend $9 billion on 100 Neo jets. Analysts say this will pile on the pressure for Boeing's 737, which last had a major upgrade in 1996.
Boeing is considering either following Airbus and putting a new engine on its 737s around 2015, or coming out with a new design to offer even more fuel savings and lower operating and maintenance costs in 2020.
"Common sense says this will put further pressure on Boeing to fast-forward their 737 update," says Howard Wheeldon, a senior strategist at BGC Partners in London.
To illustrate Boeing's dilemma, long-time 737 customer Southwest Airlines said recently 2020 was "too long to wait" for a replacement.
Against this backdrop, the Neo orders have helped Airbus in its annual slugfest with Boeing for all aircraft types, from the single-aisle jet up to the extra-large airliners such as the Boeing 747-8 jumbo and the Airbus A380 superjumbo.
Airbus sold 169 jets between January 1 and the end of last month, pushing it past Boeing's 153 gross orders.
But Boeing, the US giant, has hinted the Paris Air Show next month is when it will end months of fence-sitting and give major indications about its strategy to airlines and investors.
"If we bring a new [aeroplane] into the market, whether we re-engine or build a new [one], we have to get it right," says Randy Tinseth, the vice president of marketing at Boeing Commercial Airplanes. "So we are going to take our time to get it right."
At issue for Boeing is a choice between making more improvements to the 737, which first took to the skies in 1967, or embracing radical change, as it did when it created the 787 Dreamliner.
For both aircraft makers, the risks are huge. Airbus spent an estimated $25bn building the A380, even though the market for extra-large jets is just 5 per cent of overall sales.
As a result, the programme's profitability is uncertain. And analysts say Boeing may need to sell 1,500 Dreamliners before it can make a profit after three years of repeated production delays and heavy discounting in its opening sales drive.
With the Neo, Airbus has taken a more pragmatic approach, Mr Pardoe says, especially in light of the huge drain on resources the European company is devoting to its other aircraft programmes.
"We took a very long, hard look at resources, including our skilled engineers, and factory space," he says, noting the design work to add a new engine to the A320 family of jets will cost $1.44bn.
Mr Pardoe says the manufacturer expects to win about 6,000 of the 12,000 single-aisle jet orders during the next two decades.
But both Boeing and Airbus will be on the lookout for new entrants.
Canada's Bombardier is entering the narrow-body passenger market with its C-Series, offering new engines as well as lightweight yet durable carbon composite materials.
To date, the C-Series is yet to sign up a launch customer, although it has been in negotiations with Qatar Airways for nearly two years.
"The Neo has sold very much as we anticipated and it has handsomely outsold the S-Series, which has been in the market for the past three to four years," Mr Pardoe says.
* with Reuters