Bigger or Faster?(Boeing and Airbus product development)(Statistical Data Included)

Former Boeing executive Tex Boullioun called the aircraft business "the sporty game," because you've got to place huge bets on new jetliners to win. A poker player, Boullioun would have loved the latest bids from the game's biggest rivals. After stalking Boeing for years, Airbus has drawn even with the U.S. giant in global market share for new jetliner sales. Late last year the European consortium decided to up the stakes. Airbus said it was building a state-of-the-art superjumbo aircraft, now called the A380, which will haul at least 600 people. The A380 is a $10 billion attempt by Europe to steal Boeing's treasure chest--the market for jumbo jets, which the 747 has monopolized since its creation in the 1960s.

Boeing passed on the challenge. The Seattle giant will neither hatch a new superjumbo design nor "stretch" the 747 to add seats. The company will update the 747 to compete with the A380--but its seeming indifference to the superjumbo market led industry experts to wonder: was Boeing losing interest in the sporty game? With profits in the commercial-aircraft industry getting thin, Boeing has been shifting its attention to new businesses, including space and communications, as it strives to become a diversified conglomerate modeled on mighty General Electric. The company even announced a plan to move its headquarters out of Seattle, the symbolic capital of the airline industry.

Boeing's change of direction seemed to clear the way for Airbus to grab the title it has coveted for decades: world's leading aircraft manufacturer. Seeking to seize the advantage, analysts say, Airbus has offered large discounts on the A380 to spark interest in the mammoth jet. Europeans were still cheering the apparent American retreat when Boeing pulled a card out of its sleeve--one signaling that the company has no intention of abandoning its core commercial business. Instead of going "big" with a new superjumbo, and following Airbus, Boeing announced plans to go "fast"--by building a revolutionary new Sonic Cruiser that would carry between 150 and 300 passengers and fly 20 percent faster than current jets (just under the speed of sound). The cruiser, says Boeing, would knock an hour off every 3,000 miles of flight time--and, unlike the Concorde, would be reasonably economical for airlines to operate. Heidi Wood, a senior aerospace analyst at Morgan Stanley in New York, calls the Boeing plan "the biggest breakthrough in air travel in 30 years." She says that Boeing may have outmaneuvered Airbus because airlines believe they can make more money with a Sonic Cruiser than they can with the A380. Says Wood: "Faster is more interesting than bigger."

The dynamics of the game have suddenly changed. Airbus executive vice president Philippe Delmas says the Sonic Cruiser was met with "interest" at Airbus headquarters in Toulouse, maybe even a little envy. "Boeing engineers are extremely creative," he says. "We don't underestimate them."

Meanwhile, conspiracy theorists suggest that Boeing's idea might be too creative--a massive bluff to scare airlines away from the A380 by promising a "new thing." Richard Aboulafia, an analyst with the Teal Group consultancy in Washington, D.C., says Boeing could build a bigger, better Concorde, but making it economical is another matter. "Costs increase almost geometrically when you get close to the sound barrier," says Aboulafia.

Bluff or not, the Cruiser idea is a crafty bid. The mere possibility that Boeing will follow through with the Cruiser is likely to deter carriers from ordering the A380. JAL, for one, was quick to express interest in a near-sonic jet. And while Boeing was unwilling to match Airbus's bet on the superjumbo market, Airbus may now be unable to follow suit with a cruiser of its own. All of its development funds are sunk in the A380 pot. "This is either brilliant psychological warfare or the greatest ambush in the history of aerospace," says Aboulafia. "Either way, it's a win for Boeing. For carriers, the A380 risk is now great. If you buy a fleet of A380s and suddenly the Sonic Cruiser appears, you've just invested in a horse-drawn carriage when cars are arriving--and that is the analogy. If the Cruiser is for real, then Airbus is toast."

What will it be: bigger or faster? Airbus ...