Boeing Benefits From Airbus A380 Production Delays
June 15, 2006
Publicly expressing its anger over the new Airbus production delay, SIA -- the first airline to use the A380 in its fleet -- said it would buy 20 Boeing 787 planes for $4.5 billion (3.57 billion euros). But SIA officials said the 787 order had no connection with the A380's woes.
The Airbus A380, which can seat 550 to 840 passengers, is meant to supplant the venerable Boeing 747 as the reigning giant of the skies, but production delays have bedeviled Airbus and its parent firm EADS.
In the middle of the market, the 250- to 290-seater Boeing 787 ordered by SIA -- with 20 additional planes on option -- is competing against the Airbus A350, whose development has also been delayed by design changes.
"It is a setback to Airbus as 20 Boeing 787 Dreamliners is a big order coming from an airline that Airbus hoped would make a significant order for the Airbus A350," Jason Pereira, an airline analyst with research and advisory firm Globalysis Ltd. in Singapore, told AFP news service.
The SIA contract, the largest for the 787 since Australia's Qantas ordered up to 115 jets in January, will restore the US plane maker as the number one in the world faster than anticipated, Pereira said.
"Boeing already looked set to regain its place as the largest commercial aircraft producer in the coming years," he said. "Now with the growing orders for Boeing aircraft -- including the 787 Dreamliners -- it looks like it is going to happen sooner."
Airbus earlier said total orders last year gave it a 52 percent share of the global market. Boeing as a policy declines to state its market share.
EADS market value plunges
The European Aeronautic Defense and Space Company (EADS), which owns 80 percent of Airbus, lost about 5.5 billion euros, more than one-quarter of its market value, Wednesday after the further A380 delivery delays were announced.
Its share price ended at 18.73 euros, down 26.32 percent from the close on Tuesday. At one point, EADS shares fell 34.10 percent to 16.75 euros and the storm continued when credit rating agencies downgraded EADS.
The firm warned that operating profit would be cut by about 500 million euros ($625 million) per year from 2007-2010 -- excluding possible contract terminations. EADS shares made a modest rally Thursday on the Paris stock exchange, rising 1.60 percent to 19.03 euros in early trading on the CAC 40 exchange.
Glimmer of hope
But all is not lost for Airbus whose single-aisle A320 is likely to remain the aircraft of choice for short-haul flights in Asia.
Air China announced Thursday it had agreed to buy 24 A320s for $1.74 billion for delivery between 2007 and 2010, boosting Airbus' fortunes in the Boeing-dominated mainland Chinese market.
And despite the delays in the A380's delivery, no Asian carrier has announced an intention to cancel orders for the super jumbo.
Korean Air said it would proceed with a $1.4-billion contract to buy five A380s despite the latest delay.
"The global status of Airbus will not be swayed much by recent developments unless clients go to (court) for damages," Kyobo Securities analyst Kim Seung-Chul said in Seoul.