Is Boeing Simply Bluffing? Stakes High In Decision Not To Build Huge New Jet

In the high-stakes poker of building commercial aircraft, it might appear Boeing has folded by shelving plans to build a superjumbo jet. Some analysts say it has simply called Airbus’ hand.

Boeing Co. said last week it was halting development on larger and longer-range versions of its popular 747-400 jumbo jet. No airlines have placed firm orders for the planes, Boeing said, and it couldn’t justify continuing the $7 billion project.

Airbus Industrie, the European consortium and Boeing’s last rival in commercial aircraft, promptly countered that it would press on with its plans for its A3XX superjumbo, and should be ready to launch the program next year.

But a number of industry analysts are skeptical whether Boeing has really given up, or whether the Airbus plane will ever leave the runway.

Paul Nisbet, analyst at JSA Research in Providence, R.I., said he thinks Boeing made its announcement because “Boeing management are finally of the opinion that Airbus won’t proceed” with its 500-passenger plane.

“They kind of challenged Airbus: ‘OK, put your money where your mouth is. Now launch,”’ Nisbet said.

Airbus spokesman David Venz said that’s what the consortium intends to do in 1998, with the first plane entering service in 2003.

Unlike Boeing, which was revamping an existing aircraft, Airbus plans an all-new plane. Airbus’ largest plane to date, the A340, seats 300 to 400 people and has a maximum range of about 8,000 miles.

The 747-400 can carry about 420 passengers 8,200 miles. The proposed Boeing 747-500X would have seated 490 people and carried them up to 10,200 miles, while the 747-600X would have carried 500 to 550 passengers about 8,500 miles.

Airbus says its A3XX would cost about $8 billion to develop. It foresees a market of nearly 1,400 planes over the next 18 years. Boeing executives and many analysts scoff at both figures.

Boeing pegs the 500-seat-plus market at 450-500 aircraft. Its executives say if Boeing needs $7 billion to rework an existing model, it will cost Airbus vastly more - perhaps double that figure - for an all-new plane.

Nisbet noted that Boeing spent $10 billion to $12 billion to develop the 777 in the early 1990s.

In November, the trade magazine Aviation Week and Space Technology cited estimates by three of the companies that make up the Airbus consortium, British Aerospace, Germany’s Daimler-Benz Aerospace and France’s Aerospatiale, that the largeaircraft market would at most be 745 planes by 2014.

Boeing was widely expected to launch the 747-500 and -600 programs at England’s Farnborough Air Show last September. Instead, Ron Woodard, Boeing Commercial Airplane Group president, discussed the economic dangers of developing such planes. In numerous appearances since, Boeing executives likewise have downplayed the aircraft.

“You have the largest airplane company in the world basically telling the world they don’t think the market is there,” said analyst Bill Whitlow at Pacific Crest Securities in Seattle. “Now Airbus is going to have to go convince private investors that Boeing is wrong.”

Airbus President Jean Pierson has long pushed to reorganize Airbus into a private corporation that could sell stock and raise money for a superjumbo. At a recent briefing, Woodard said he’d welcome that, since it would give Airbus the same shareholder pressure he faces.

“If Boeing concluded that it’s not the right time to develop the airplane, it’s difficult to see how Airbus could come to a different conclusion,” said Peter Jacobs, analyst at Ragen MacKenzie in Seattle. “But we just have to wait and see.”