Airbus admits it's in a "serious crisis"

FARNBOROUGH, England — Airbus, reeling from a management shakeup that followed delays in its flagship superjumbo jet program, unveiled a long-awaited revamp of its midsized A350 today and acknowledged that it was in the midst of a "serious crisis."

New CEO Christian Streiff, who has been on the job only two weeks, said the A350XWB — for "extra-wide body" — would be a completely new design. He also reaffirmed the company's faith in the A380 superjumbo, which is taking part in the daily flying displays at Britain's Farnborough Air Show.

"Yes, Airbus in the middle of a serious crisis in our relationship with our customers," Streiff said at a news conference. "Yes, this is something we are taking extremely seriously inside Airbus, and yes, we know the competition is taking advantage of this today."

In an illustration of that, its U.S. rival Boeing Co. announced several orders today for passenger and cargo planes.

Seeking to reassure customers and investors that Airbus is on the road to recovery, Streiff pledged to personally oversee "all aspects" of the new A350XWB program over the next three months.

The plane will cost about 8 billion euros ($10 billion) to develop, he also confirmed — almost doubling the previously estimated 4.5 billion euro budget.

The original A350 was billed as a rival to Boeing's long-range, fuel-efficient 787, but had won just 100 firm orders compared to 360 firm orders for the 787.

Those 100 orders will now have to be renegotiated and converted. Airbus Chief Operating Officer John Leahy conceded that Airbus might lose "one or two" of the 14 customers that have placed the firm orders and 82 additional commitments.

Streiff said the company will begin taking binding orders for the new plane in October and the plane will enter service in mid-2012. "This is an entirely new design, without compromise and using all the latest technology," he said.

The new A350 will make greater use of composites — which make up 45 percent of its mass, compared with 50 percent for the 787.

Like the Dreamliner, the A350XWB maintains higher pressure and humidity in the cabin to reduce dehydration and features larger windows.

Airbus said it will offer three versions of the new plane and would launch the middle-sized version first in response to customer demand.

The A350-900, due to enter service in 2012, will seat 314 passengers in a three-class configuration, compared to the 280 accommodated by the larger of the two Dreamliner versions announced so far, the 787-9.

While matching the Boeing plane's 8,500 nautical mile range, the plane will undercut its rival's cash operating cost per seat by 7 percent, Leahy said.

Airbus has been struggling to get back on track since the announcement last month of a further seven-month delay to its A380 superjumbo program sent EADS shares plunging and led to the departure of Airbus Chief Executive Gustav Humbert and EADS co-CEO Noel Forgeard.

Streiff reaffirmed the company's faith in the 555-seat A380, saying, "It's a great aircraft, it is performing very well in test flights and in the certification process."

While Airbus has struggled of late, Boeing has done well. The European plane maker reported last week that its sales fell by more than half in the first six months of the year to 117 planes, compared to rival Boeing's 480 net orders for the same period.

Boeing announced more orders today. Indonesia's Lion Air exercised an option to buy an additional 30 737-900 jets, with a catalog value of over $2.2 billion for delivery in 2010-2012.

LoadAir Cargo, a new air freight operation based in Kuwait, also said it had signed an order with Boeing for two 747-400 extended range freighters in a deal worth $494 million at list prices.

Boeing and Qatar Airways put out — and then recalled — a release announcing an order for 20 Boeing 777s, in a deal valued at approximately $4.9 billion at list prices. Qatar also canceled a news conference at the last minute.

Boeing spokesman Peter Conte said the order for the widebody 777s has been booked for several weeks to an unidentified customer, and that the order books would not be altered. "It's nothing having to do with the deal. The deal is done," he said.

Conte said that the announcement of the order that had been planned for Farnborough was canceled at the last minute. It was unclear when or if it might be rescheduled.

A spokesperson for Qatar Airways did not answer the phone. The airline told Dow Jones Newswires it was still in talks with Boeing but has made no decision on an order for any Boeing planes.

Boeing Commercial Airplanes CEO Alan Mulally said today that the company is talking to 25 potential buyers for the 747-8, a larger version of its jumbo developed in response to the troubled A380.

He declined to identify the airlines but said many already operated 747s. "You can just look down the 747 fleets and see who they are," he said.

Mulally said that the company would reveal more detail on its order backlog, including the second quarter, when it releases earnings figures next week.

Boeing acknowledged Sunday that its 787 Dreamliner is overweight and experiencing delays with some suppliers — while stressing that the jet remains on budget and on schedule.

"We're a little over where we want to be at this time on weight, but ahead of where we were on previous programs, so we're really focused on weight-efficient structure right now," Mulally said at a briefing for reporters in London.

"Some partners are a little behind on the schedule but we're working with them on recovery plans to catch up," he said.

Mulally declined to specify where the problems were occurring but emphasized that the plane remains on course for its first flight in mid-2007 and entry into service the following year. Boeing does not release development costs for its aircraft, reported to have cost about $9 billion.