airbus prepares party for a380

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    Airbus prepares party for A380 despite turbulence
    05:01, Monday, 17 January 2005

    By Jason Neely, European Aerospace & Airlines Correspondent

    LONDON, Jan 16 (Reuters) - Cost overruns and political
    bickering will be set aside on Tuesday at Airbus as the
    Toulouse-based planemaker unveils its mighty A380 double-decker,
    the biggest airliner ever built.

    French President Jacques Chirac and British Prime Minister
    Tony Blair are among more than 5,000 guests invited for a first
    glimpse of the A380, which some airlines are betting will
    reshape the industry.

    Customers have committed almost $40 billion to buying the
    555-seat plane, expecting it to lower operating costs and fatten
    profits, battered in a slowdown since 2001.

    "It's the first seriously radically new plane for a
    generation," said Paul Moore, spokesman for British airline
    Virgin Atlantic [VA.UL], which has six A380s on order.

    Airbus is throwing a party despite a less festive mood
    behind the scenes.

    Chief Executive Noel Forgeard is leaving after waging a
    feisty public bid to become co-CEO of parent firm EADS ,
    leaving questions about who will lead Airbus and sparking ill
    will within EADS.

    "I didn't think that human nature was capable of such
    baseness," Philippe Camus, the man Forgeard will replace at EADS
    later this year, told reporters last week.



    COST OVERRUNS

    The A380 is also causing headaches as it runs 1.45 billion
    euros ($1.9 billion) over budget and battles a weight problem
    that threatens to undo its promised cost-saving performance.

    While not an uncommon problem for new planes, the stakes are
    higher with the A380, which at a list price of $260 million is
    an expensive gamble.

    Airbus' suppliers are also feeling the pinch, with British
    engineering firm Cobham among those running over budget
    on work to develop A380 equipment.

    Virgin Atlantic said delays in developing some equipment
    contributed to its decision to delay its A380 deliveries.



    GAME CHANGER

    The plane will dwarf rival Boeing Co.'s 416-seat
    747-400, for four decades the reigning heavyweight. It will
    accommodate more than 800 if airlines use all-economy seating.

    "The aircraft, which is enormous by any measure, should be a
    'game-changer' in the long-haul market," J.P. Morgan analyst
    Chris Avery said in a recent research report.

    The risk for Airbus is that it must deliver on the enormous
    promise of the plane, which will take its first flight in March
    and faces a year of flight trials.

    "A lot of the good news has been factored into EADS shares,"
    said one London-based analyst.

    Airbus needs to keep the A380 on schedule, not only to
    satisfy customers but also to allow its engineers to turn to
    building its planned A350 mid-sized model and spearheading
    Europe's planned military transport plane, the A400M.



    BULLISH FORECASTS

    Airbus must also meet its bullish forecasts regarding demand
    for the A380 and recoup the more than 12 billion euros that the
    plane will cost to create.

    The planemaker foresees demand for 1,650 planes in the A380
    category above 450 seats over the next 20 years.

    Rival Boeing Co. expects demand for less than a third
    of that number as it mulls a stretched version of the 747.

    J.P. Morgan's Avery said Airbus would need to sell 248 of
    the planes just to break even, versus the 149 commitments
    collected so far.

    Adding further pressure is a recent agreement between U.S.
    and European negotiators to work out a pact, which is likely to
    make it harder for Airbus to receive state funding.



    TRACK RECORD

    On Tuesday, Airbus will put all such concerns aside to show
    off not only of the most talked-about plane in years, but also a
    track record that has helped it topple Boeing as the biggest
    commercial aircraft maker.

    Airbus topped Boeing in 2004 both in deliveries and new
    orders.

    If all goes to plan, the A380 might kill the 747 jumbo and
    become a must-have plane for airlines on long routes linking
    Asia with Europe and the United States.

    The risk is that the public balks at the plane, equating a
    bigger plane with longer airport delays.

    If they do, airlines may find it a plane that is hard to
    fill and therefore not the cost-saver they had hoped for.

    Of Airbus' more than 200 customers, only 14 have committed
    to the A380, so it is clear that many are watching to see what
    happens.

    (Additional reporting by Michael Smith)

    ((Reporting by Jason Neely, European Equities Desk; Editing
    by Elizabeth Fullerton; +44-207-542-8825, fax +44-207-542-7634;
    Reuters Messaging: [email protected]; e-mail:
    [email protected]))



    (c) Reuters Limited 2005
    REUTER NEWS SERVICE

    >>>>>>>>>>>>>>>>

    Would not want to see too many of these fall out of the sky.

    800 people if used in total economy configuration.
 
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