Suppliers asked to help pay development costs of A350

PARIS — Airbus said Monday it wants suppliers to its A350 XWB midsize jet to pay more than 15 percent of the cost of the project, the company's 11.6 billion euro ($15.4 billion) answer to the Boeing 787.

But the European plane maker said no decision had been made on the rest of the funding or where to build the new plane, projected to enter service in 2013.

Giving his first news conference as Airbus chief executive, Louis Gallois confirmed the overall program cost but warned he would give no information about future increases unless the budget was altered by a "material" amount.

"We feel under no obligation to update these figures in the future, any more than our competition does," Gallois said. Boeing refuses to say how much it is spending on the 787.

Monday's presentation was scheduled at short notice, three days after the board of Airbus parent European Aeronautic Defence & Space (EADS) approved the launch of the A350, which it badly needs to plug a gap in the European aircraft maker's product line.

Airbus is set to fall behind Boeing on orders this year for the first time since 2000.

The overall program cost includes 10 billion euros ($13.3 billion) for research and development and 1.6 billion euros ($2.1 billion) of capital expenditure announced by Gallois, who stayed on as EADS co-chief executive after his appointment in October to replace departing Airbus boss Christian Streiff.

The figure is significantly higher than the 8 billion euros ($10 billion) given by Tom Enders, the other EADS chief executive, before July's Farnborough Air Show.

Airbus said during the show that the A350-900 would be 7 percent cheaper to run than the rival Boeing 787-9, based on operating cost per seat.

To meet that promise, repeated Monday, Airbus has had to pare weight from its design by increasing the share of composite plastic materials to 50 percent, compared with the 45 percent it announced in July.

In addition to the wings, Airbus will make the fuselage skin from plastic composites.

But it will not use Boeing's innovative manufacturing method of curing the pieces in huge single-piece barrel sections. Instead, the A350 fuselage skin will be fabricated from composite plastic panels, which Airbus says will be easier to maintain and repair.

New airplane programs invariably offer a choice of engines, but so far only one engine partner — Rolls-Royce — has signed on for the A350.

General Electric executives have expressed unwillingness to provide an engine for the largest of the three A350 models Airbus envisions, since it would directly compete against Boeing's 777-300ER with its exclusive GE-90 engine.

"We are still in active discussions with GE but we do not yet have an agreement," said Airbus spokeswoman Mary Anne Greczyn on Friday. "At the moment the aircraft is only available with the Rolls- Royce engine."

Toulouse, France-based Airbus is asking suppliers to the A350 program to fund 1.8 billion euros ($2.4 billion) of overall cost by paying for their own share of development work, in exchange for a share of profits — in the way Boeing has done for the 787.

Airbus is in talks with "about 10" potential partners and aims to finalize the risk-sharing agreements in the first half of 2007, Gallois and other company officials said.

EADS had said the plane would be financed "predominantly from the company cash flows," but Gallois refused to rule out state guarantees or refundable launch aid from governments.

"No decision has been taken or is even imminent," he said.

A decision to fund part of the A350 with government loans could exacerbate a European Union dispute with the U.S. over subsidies to Airbus and Boeing currently before the World Trade Organization.

Information from Seattle Times aerospace reporter Dominic Gates

is included in this report.

New setback

for A380 jet

International Lease Finance Corp., the world's largest plane lessor, dealt another blow to Airbus' beleaguered A380 jumbo jet, deferring an order for 10 planes for three years and swapping an agreement for five freighters for passenger planes.

The 10 planes had been set for delivery from 2010 through 2012.

The ILFC decision leaves Airbus with only one customer for the A380 freighter, United Parcel Service for 10 planes.

FedEx last month dropped its agreement for 10 freighters and placed an order with Boeing for cargo planes.

The A380 is two years behind schedule and will generate operating losses of 4.8 billion euros ($6.4 billion) by 2010.

"The logical outcome of this is the loss of another 10 planes, the UPS order," said Richard Aboulafia, vice president of the Teal Group, a Fairfax, Va.-based consulting company.

"I doubt they're going to stay the only freighter customer, either because Airbus will cancel or because UPS will cancel," Aboulafia said.

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