Airbus, Boeing heading for tough 2009

For many of us, the New Year is about making resolutions - but for rival planemakers Airbus SA and Boeing Co., 2009 will be about keeping promises.

Both face production challenges in getting their delayed flagship jets to airline customers who are eager to put newer, less fuel-hungry jets into service.

The Chicago-based planemaker is beset by problems with its 787, which analysts say look greater than the troubles Airbus faced with its A380 superjumbo.

Boeing last month announced a fifth set of delays for its long-haul 787 that will set back delivery for two years. Analysts said multiple problems with everything from design to parts and suppliers could push the timetable even further back.

Sandy Morris, an analyst at ABN Amro in London, said Boeing's problems with the 787 are "in a different league" than those faced by Airbus with the A380 because they seep deeper into the design and production process. Airbus mishandled what was essentially a problem of "two wires being too short and not meeting," he said.

Scott Hamilton, an aviation consultant and managing director of Leeham Co. in Washington, D.C., said the 787 problems are "far more systemic than they were with the A380 and will take longer to resolve."

The 787 is designed as a mid-sized, long-haul jet that seats between 210 to 330 passengers. It will be the first large passenger jet made with a lightweight composite fuselage, making it about 20 percent more fuel efficient than the 767 it is replacing. The first delivery is now scheduled for the first quarter of 2010.

Hamilton said Boeing will find it difficult to keep its current "aggressive timetable."

The problems are heightened by the numbers of customers waiting for the 787: at 910 that's more than four times the customers for the A380.

Marko Lukovic, an industry analyst with Frost & Sullivan consultancy in London, said that despite the problems, the hot-selling plane "is a product that is worth waiting for."

Two years ago, it was Airbus's flagship jet that hit the headlines with wiring problems and a series of management missteps which cost the planemaker billions.

Investigators are still looking into stock sales by company executives and shareholders at the aerospace and defense giant before a June 2006 announcement of delays for the A380. Airbus parent EADS shares tumbled 26 percent in one day when those problems were revealed.

Airbus finally delivered the first superjumbo in late 2007 and a key challenge of 2009 will be accelerating production to meet its delivery schedule.

Last year the planemaker met its target of 12 deliveries but Louis Gallois, head of EADS, said in November that Airbus might not make its goal of 21 deliveries this year.

Airbus has booked 198 orders for the 525-seat jet.

Morris said the Airbus philosophy of shuttling large numbers of travelers between hub airports in superjumbos makes more sense in a troubled economic climate. Boeing argues that passengers are willing to pay more to fly directly to their chosen destination, without changing at a hub.

Meanwhile, Airbus is pressing ahead with its A350 XWB, the plane designed to compete with the 787. Details on the financing plans and design specifics may be revealed on Wednesday at a ceremony in Toulouse, France, to mark the laying of the first stone of the final assembly line.

Airbus had to redesign the plane after customers balked at an earlier version. It has 478 orders for the medium capacity long-haul aircraft, which is due to enter service in 2013.

In 2009, Airbus will also have to deal with its embattled A400M military transport program which EADS said on Friday requires a "new approach."

With a raft of technical difficulties yet to be resolved, EADS said deliveries won't start until three years after the first flight, which was originally scheduled for the end of last year. It hasn't set a new date for the maiden flight.

Airlines may be more forgiving about delays as they seek ways to reduce spending amid the economic crisis. Some are grounding planes, cutting capacity and delaying or even canceling orders as air traffic slows.

Tight credit conditions are also tempering the ambitions of both planemakers, who may have to help airlines secure funding amid the credit crunch. Investors don't want to see Airbus or Boeing secure large orders because they made large financing commitments, ABN Amro's Morris said.

Airbus reports its full year tally of orders and deliveries on Thursday, but already by the eleven months mark, it had surpassed its American rival on both last year.

In the first 11 months of 2008, Airbus handed over 437 jets, beating the full-year tally of 375 deliveries announced by Boeing last week and keeping its title as the world's biggest planemaker. The U.S. jet maker's results were hurt by an eight-week machinists strike in the fall.

Airbus also beat Boeing on orders last year. In 11 months it booked 756 net orders - compared with Boeing's full-year total of 662.