STOCK QUOTES     More market data...

Airbus prepares to take on 7E7

By Andrea Rothman and Rachel Layne
Bloomberg News

E-mail this article Print this article Search archive Most read articles Most e-mailed articles

The aircraft would take advantage of new, fuel-efficient engines initially designed for Boeing's plane by General Electric and Rolls-Royce Group and would cost $2 billion to develop, said the people, who declined to be identified.

They said Airbus may announce a decision to go ahead with the plan by year-end.

The plane may help the Toulouse, France, jet maker defend its 80 percent share of the market for airliners with 250 seats, according to Klaus Breil, a fund manager at Adig Investments.

Boeing, which delivered fewer planes than Airbus last year for the first time, estimates there will be demand for 3,000 planes the size of the 7E7 and A330 over the next 20 years.

"This would cut into the 7E7 business case," said Breil, which has the equivalent of $6 billion under management, including 7 million shares of European Aeronautic, Defence & Space (EADS), Airbus' parent.

Shares of EADS have risen 17 percent so far this year, while those of Boeing are up 24 percent on investor optimism of a rebound in demand from airlines.

Airbus spokeswoman Barbara Kracht declined to comment on the plan, which was reported yesterday by the London-based Sunday Times newspaper.

"They finally figured out that the 7E7 is real, and they're in trouble," said Randy Baseler, vice president of airliner marketing at Boeing, in a telephone interview.

The planes challenging the 7E7 would look much like the current A330-200 and A330-300 models. They would be lighter because their wing boxes, the central section that holds the wings together, would be made from composites rather than aluminum.

Airbus has been discussing the new plane, which would be called the A350, with customers for several months and will proceed once there is an agreement with an airline to serve as the first major customer, the people said.
 
Boeing signed a contract with All Nippon Airways on July 28 for 50 of the 7E7s worth as much as $6 billion and has also announced commitments for 10 additional planes from three other airlines. Boeing Senior Vice President Mike Bair said in June the plane maker is talking to 30 airlines about orders for 600 7E7s.

General Electric spokesman Rick Kennedy said the company designed its 7E7 engine with the intent of selling to others.

"As market leaders on the current A330, Rolls-Royce would clearly be interested in providing the latest generation of Trent series engines for any potential application," said Martin Johnson, a Rolls-Royce spokesman. About 40 percent of all A330s have Rolls-Royce engines, he said.

The engine makers would share in the $2 billion development cost of the new Airbus plane, including the engines, the people said. General Electric's engine might be the first to go on the plane because it was developed for a dual application.

The Rolls-Royce engine would require a new compressor, the people said.

Airbus plans to put the new engines on both its A330-200 model, which seats 253 people as well as the A330-300, which seats 353 passengers.

The 7E7 will seat between 217 and 289 passengers and offer ranges as great as 8,000 nautical miles.

The Airbus A330-300 now has a range of 5,500 nautical miles, while the A330-200's is 6,450 nautical miles. The ranges of both planes would increase through the new engines and by using more composites in their construction, which would cut their weights, extending the distances they could fly, the people said.

David Calhoun, who as chief executive of GE Transportation oversees General Electric's engine unit, said in an interview the company intended to compete for an engine on the version of the A330 that would go up against the 7E7 if Airbus decided on it.

"If Airbus develops its plan for the plane, we'll intend to compete, just because it makes sense," Calhoun said at the Farnborough Air Show in July. Boeing "sort of set that stage when they decided to go with an open competition and multiple source. I think all of us designed our engine programs on that basis."