November 18, 1997 in Nation/World

Airbus Nears Number One As Boeing Stumbles European Manufacturer Is Within Reach Of Outselling Rival In 1997

Bloomberg News
 

Only once in its 28-year history has Airbus Industrie sold more planes than archrival Boeing Co. That was in 1994, and even Airbus executives admit that victory was meaningless, coming in the industry’s worst sales year in decades.

Now, the European upstart is within reach of repeating its feat. This time, with industry sales booming, victory would be impossible to write off as just luck.

With only six weeks left in 1997, Airbus’s new orders are outpacing Boeing’s by 425 to 415 - the best year ever for the Franco-German-British-Spanish consortium. It makes Airbus’s goal of a consistent 50 percent market share by early in the next decade seem plausible for the first time. Currently, Airbus’s backlog equals 30 percent of airlines’ outstanding orders.

“It’s clearly been a great year for Airbus,” said Keith McMullan, managing director of London-based consultancy Aviation Economics.

Boeing won’t discuss the European lead. “We’re focusing on our business, not theirs,” says spokeswoman Janice Hayes.

Despite such nonchalance, winning the order championship in a banner year carries psychological weight. It would be especially important for Airbus, which still suffers from a parvenu stigma among conservative airlines.

First place would also help Airbus tap capital markets for future projects, as it loses government funding. And greater market share will cut Airbus’s costs, notes analyst Nick Cunningham of Salomon Bros. in London.

As year-end approaches, industry executives say both Boeing and Airbus are negotiating furiously to win airline orders and become No. 1. Some think both companies are “stockpiling” orders, to be announced as late-December surprises. Whoever wins the title, Airbus is having a banner year during a time of costly production delays for its rival. Boeing is having trouble replacing workers it laid off during the doldrums of the early 1990s. It has even been recruiting in Toulouse, the French home of Airbus.

Airbus assembly lines, however, are humming smoothly. Europe’s workrules make layoffs difficult, penalizing Airbus in lean times but keeping teams intact for fat years.

Boeing, of course, remains a formidable competitor. It has 20-year commitments from American Airlines, Delta Air Lines and Continental Airlines, giving it a firm grip on the U.S. plane market, the world’s largest.

Moreover, Airbus faces daunting trials from within. Managing Director Jean Pierson, 57, who has led it through its rapid growth of the past decade, plans to retire in March with no successor in sight.

Traditionally, the top job at Airbus is held by a Frenchman and the second post by a German. That’s because Aerospatiale and Daimler Benz Aerospace own the biggest shares, with 37.9 percent each. BAe has 20 percent and Spain’s Construcciones Aeronauticas 4.2 percent.

This time, France has few suitable candidates. The likeliest, former Aerospatiale chairman Louis Gallois, 53, reportedly wants to remain head of the national railway.

Many analysts back British Aerospace Plc’s financial director, Richard Lapthorne, 54. He is credited with salvaging BAe from nearbankruptcy in 1992. With shares in state-controlled Airbus likely to be floated in a few years, his financial acumen would encourage investors.

“In the past, the French got this job, the Germans got that one and the U.K. got whatever’s left,” said Mike Turner, joint managing director at BAe. “We have to find the best guys to run Airbus. It’s going to be one of the biggest companies in Europe.”


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