(More) Bad News for Airbus

Singapore Airlines said the other day that Airbus has to redesign its Airbus A350 if it wants to really compete with Boeing's 787.

Bloomberg reports that it took Airbus four attempts to come up with today's A350. And the most interesting fact is, the A350 is pretty much a revised A330. Just use more composites, new parts, and a new tail, and you have a totally different aircraft, right?

Wrong, says pretty much all of the industry executives. Singapore Airlines CEO Chew Choon Seng said, "Having gone to the trouble of designing a new tail, and introducing a lot of new composites, and everything else, they might as well go the whole way and design a whole new fuselage as well instead of using something old. It would make it more directly competitive with the 787.'' And according to Steven Udvar-Hazy, CEO of ILFC, an airplane lessor company, Airbus needs to spend $8-10 billion dollars to revamp the A350 and should completely redesign the plane to make it bigger and faster. "This removes any possible doubt that Airbus needs a new plane. When the most prestigious airline in the world and the biggest leasing company in the world both send you the same message, you need to listen," said Richard Aboulafia, vice president of the Teal Group, a Fairfax, Virginia-based consulting company.

After Boeing announced the 787 project (back when it was called the 7E7) back in December 2003, Airbus dismissed it. Of course, Airbus was busy on its A380 project (which they need to delay again, by the way) and publicly annouced garbage to the tune of, "Nobody wants an airplane like the 7E7. More airlines wants the A380." And while airlines did want the A380, a bunch want the 787. So when orders for the 787 took off (bad airplane pun intended), Airbus scrambled to come up with a competing product. The result was the A350, which as I said before is really a modified A330. As of March 30 Boeing has 298 orders while Airbus only had 100 orders and 92 committments.

So, how much does an A350 and a 787 cost? The A350 is $170 to $190 million each, while the 787 is $142 to $150 million. And speaking of money, Airbus' parent company EADS is under lots of financial pressure, noted analyists. Redesigning the A350 would cost billions of dollars, and BAE Systems, which owns 20% of Airbus, announced recently that it was selling its stake. So EADS now needs to buy that 20%, which is valued currently at $4.3 billion.