Airbus' jet lag is boost for Boeing

Airlines and investors gave Boeing rival Airbus a double dose of rejection yesterday as the European plane maker's latest delays in delivering the world's largest passenger aircraft resonated through the industry.

As Airbus' parent company saw its stock hammered an unprecedented 26 percent, Boeing stock rose 6.5 percent — and Boeing also landed a critical jet order that Airbus had coveted.

That deal, worth $4.52 billion at list prices, was for 20 Boeing 787s and options for another 20.

The perception of disarray at the European plane maker may benefit Boeing more than the specific delays in the A380 do.

The delays could rattle airlines' confidence in the promised schedule for the planned A350, which Airbus is busily revamping as its answer to the hot-selling new Boeing 787.

"These further problems on the A380 will no doubt ... increase concerns over Airbus' ability to manage A350 development risk," Deutsche Bank analyst Ben Fidler said in a research report.

The A380's problems compound the financial pressure on Airbus and its parent company, European Aeronautics Defence & Space (EADS). Hundreds of millions of dollars in annual profits will be lost for several years because of the delayed deliveries, just when Airbus badly needs money to launch the redesigned A350.

That crunch increases the likelihood Airbus will turn to European governments for billions of dollars in new launch aid, a practice that already has the U.S. and European Union trading lawsuits before the World Trade Organization.

Airlines were quick to react to Tuesday's announcement that delivery dates for the A380, already delayed by several months from the original schedule, would be stretched an additional six months or more.

Singapore Airlines, one of the world's top carriers and the first to buy the A380, said it would seek compensation from Airbus.

It worsened the blow, and dashed Airbus' hopes of gaining a crucial A350 customer, by announcing it would buy 20 Boeing 787-9 aircraft and take options on 20 more.

Emirates Airlines, another sought-after buyer, said it was reconsidering its order of 45 A380s.

Australia's Qantas Airways said it was seeking talks with Airbus over its order for 12 A380s and wants some of its money back.

Malaysia Airlines said it was reviewing terms of its deal for six of the planes.

Airbus already faces tens of millions of dollars in penalties to airlines from earlier slipped deadlines on the A380.

EADS saw almost $7 billion in market capitalization evaporate Wednesday after the A380 delay announcement and a warning that operating profit would drop by about $625 million each year between 2007 and 2010. Its shares plummeted 26 percent to close at 18.80 euros ($23.63).

Boeing shares, meanwhile, rose 6.5 percent to $82.01 on the New York Stock Exchange.

Airbus overtook Boeing in order numbers in 2001 and in deliveries in 2003, and until recently looked in robust shape.

But the anger fueled by the disclosure of production bottlenecks with the A380's electrical systems — the second major delay for the $300 million A380 — suggests a less rosy future for the Toulouse, France-based plane maker.

"Boeing is eating Airbus' lunch, certainly this year. And they'll do it again next year and for the foreseeable future, unless Airbus can pull a rabbit out of a hat," said Jim Smith, aviation analyst and editor of Jane's Transport Finance.

It was the second Airbus project to falter recently, after the A350, which the company had hoped would be the answer to Boeing's fuel-efficient 787.

The Singapore-Boeing deal stung especially deep because Airbus had hoped Singapore Airlines would be one of the first and biggest customers for the A350.

But airline dissatisfaction with the A350 has forced Airbus to redesign some of its parts and consider a costly overhaul, delaying its first delivery for several years.

That delay is likely to cost it, as well.

OAO Aeroflot, Russia's largest airline, said the uncertain schedule for the A350's debut may force the carrier to split a $3 billion order for new long-haul airplanes between Boeing's 787 and a "redefined" A350.

"We will seriously feel the need for new aircraft beginning in 2010," Sergei Koltovich, head of fleet planning said Wednesday. "Given that the A350 will come out two to three years later, we will need to rely on Boeing."

The European plane maker's executives were contrite Wednesday on a conference call with analysts.

"I'm extremely sorry" for the delays, said EADS Co-Chief Executive Noël Forgeard, 59, who in 2000 oversaw the launch of the A380 as the head of Airbus.

"I built my entire industrial career on building confidence with shareholders," Forgeard said. "This announcement comes as a big blow."

He deflected suggestions that the setback could cost him his job. "We have now to find the right ways forward," he said.

But SG Securities analyst Zafar Kahn, who cut his recommendation on EADS stock to "sell" from "buy," said management should be held accountable. "I think there would be serious questions raised over the credibility and viability of the chief executive and chief financial officer, because this represents a failing on the part of senior management," he said.

Moody's Investors Service lowered its outlook on EADS to "negative" from "stable," citing "a number of immediate, medium and long-term investment decisions" that Airbus' majority shareholder faces.

Among those issues, said Moody's, the most urgent demand is that the 20 percent minority shareholder in Airbus is exercising its right to be bought out.

If there's a silver lining in yesterday's turmoil at Airbus, it is that the amount EADS will have to pay for that minority stake is likely to be 900 million euros lower, according to Morgan Stanley.

The Associated Press, Reuters and Bloomberg contributed to this report.