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Mega plane: Airbus is building the biggest airliner ever, and more than 100 A380s have been ordered by the airlines. A brilliant leap-or great folly?
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Weathering the Squeeze
THE A380'S OUTSIZE DIMENSIONS POSE a host of other problems. Consider just one: how to evacuate passengers from the upper deck in case of emergency. U.S. aerospace contractor Goodrich developed a new, higher-friction material for the plane's evacuation slides so that passengers don't pick up too much speed and get injured when they reach the bottom.
Airbus also created an immense challenge by deciding to assemble the plane in Toulouse. Since its beginnings in the 1970s as a loose-knit consortium of European companies, Airbus has always maintained a careful geographic balance in its manufacturing. The wings of all Airbus planes are manufactured in Britain, the tails in Spain, and fuselages in France and Germany. Then the parts are loaded onto bulbous freighter planes and brought to Toulouse for assembly. But the A380's parts are too big to fit in any freighter plane. So Airbus has developed a plan that requires building an ocean-going ferry and specially designed river barges, as well as widening the Bordeaux-Toulouse road and cutting down roadside trees so the oversized cargo can get through. Forgeard says the company considered alternatives -- for example, moving the assembly operation to a port city such as Hamburg, Germany, or St. Nazaire, France, where Airbus already has factories. But such a move would have been politically explosive. Besides, he says, ``The cost to ramp up the final assembly line would have been much higher.''
Financially Airbus has weathered the worst of the squeeze caused by the plane's development. Reassuring investors, the company has kept its promise to finance its $5.1 billion share of research and development costs from cash flow without commercial borrowing. Most analysts figure Airbus will enjoy a nice bounce in operating earnings, starting at the end of next year as R&D spending tapers.
The A380's backers also are breathing easier about airports' ability to handle it. At most airports, the needed modifications are estimated to cost $80 million to $100 million, mainly for outdoor improvements such as reinforcing taxiway bridges and widening runway shoulders. That isn't peanuts, but it's modest compared to the cost of, say, putting in a new runway, which can run to $1 billion. The A380 can operate on existing runways because, with its swept-back wings, it takes up only slightly more space than a 747. ``It's not a dramatically different kind of airplane,'' says Richard F. Marchi, senior vice-president for technical and environmental affairs at Washington (D.C.)-based Airports Council International North America.
Still, plenty of questions remain about the A380. Out of those 121 orders, 45 are bound for a single carrier, Emirates Airline. ``We can't wait to get our hands on the A380,'' says Emirates President Tim Clark. True, Emirates has posted 30% to 40% sales growth in recent years as its owner, the oil-rich United Arab Emirates, has poured billions into developing its hub in Dubai as a transit station for globetrotting travelers. But if Emirates' growth falters, the A380 order book would take a huge hit.
Another concern is the hefty discounts Airbus has offered to launch customers, by some accounts more than 30% off the roughly $250 million list price. Airbus insists that such reports are exaggerated and that the discounts are built into financial projections. But some analysts think that because of heavy discounting, Airbus's supposed 250 breakeven figure is pure fantasy. ``Airbus could sell hundreds and still lose its shirt,'' says Richard L. Aboulafia, an analyst at Teal Group Corp., a Fairfax (Va.)-based aviation consulting firm. Still, even if the plane were a disastrous money-loser, Airbus would have a bit of a safety cushion because the low-interest loans provided by European governments would not have to be repaid in full.
Moreover, Airbus still hasn't found a buyer in Japan, which the company predicts will account for a major share of the superjumbo's eventual market. Sales chief Leahy predicts that after carriers such as Singapore Airlines and Virgin Atlantic Airways begin flying into Tokyo, ``the Japanese are going to buy it.'' But for now, both Japan Air Lines Co. and All Nippon Airways Co. remain all-Boeing carriers.
Asian Opportunity
THE BIGGEST QUESTION IS WHETHER Airbus has correctly gauged long-term demand for the superjumbo. The European planemaker predicts that over the next 20 years, airlines and freight carriers will need a minimum of 1,500 more aircraft at least as big as the 747. Boeing says that no more than 320 extra-large planes will be sold over the next 20 years as the industry moves away from hub-and-spoke networks toward more convenient direct flights between smaller airports. This route fragmentation is the rationale behind Boeing's 7E7, a fuel-efficient jet carrying about 220 passengers intended to compete with Airbus' A330. Boeing predicts a market for 2,000 to 3,000 such intermediate-size planes over the next 20 years.
Who's right? Boeing's fragmentation scenario certainly looks compelling when viewed from the U.S., where the number of transatlantic departures by Boeing 747s declined slightly from 1990 to 2000, while transatlantic departures by smaller widebodies such as the Boeing 777 and the Airbus A340 nearly tripled. ``We believe more passengers are going to want to fly on direct routes on midsize airplanes instead of to hubs on giant size airplanes,'' Condit says. Smaller and more versatile aircraft reduce financial and operational risks to airlines, particularly in economic downturns, compared to jumbo jets, he adds.
Yet outside North America, the hub-and-spoke model flourishes. ``In Asia, that's the only way to move,'' says Chin Lim, an airline industry analyst at Morgan Stanley in Singapore. ``You fly passengers from Australia into Singapore or Hong Kong and then move them to London or Frankfurt.'' Indeed, some carriers hope the A380 will help them establish major hubs. ``We would like to make [Seoul's] Incheon International Airport a strong hub in Northeast Asia, and the aircraft fits our strategy well,'' says Korean Air Lines Co. Ltd. CEO Cho Yang Ho.
A chronic shortage of departure slots at many Asian and European airports works in the A380's favor, too. Virgin Atlantic, for example, has only 2% of the slots at Heathrow. ``We've been through a horrible two years, but air traffic is going to grow, and the A380 is the only way we can grow our business,'' says Virgin CEO Steve Ridgeway, who is buying six superjumbos.
While Boeing has no plans to offer an updated version of the 747, some industry watchers say it will be forced to reconsider when the A380 enters service. Sandy Morris, a London-based aviation analyst at ABN Amro, predicts that airlines now flying 747s will scramble to buy A380s once their rivals introduce the more efficient superjumbo. ``Boeing has made some serious mistakes in the past,'' he says, ``but this is the biggest one.''
That may be overstating things a bit. But clearly, Airbus has momentum on its side, and the task of building the world's biggest plane clearly has energized its troops. ``At every step, our confidence has grown,'' says Rob Bray, one of a core group of about a dozen engineers who began roughing out the plane's design more than a decade ago. This dogfight has only begun.
(available online)
The A380: A PAN-EUROPEAN Plane
Airbus is building major components of the A380 in four countries -- France, Germany, Britain, and Spain -- then bringing them to Toulouse for assembly. It's a gargantuan task:
FERRY
Airbus had to build an ocean-going ferry to bring parts of the fuselage and wings to a port near Bordeaux.
BARGES
Custom-built barges will carry the pieces up the Garonne River, passing beneath a bridge at Bordeaux that had to be reinforced.
HIGHWAY
From the barges, the components will be loaded onto huge trucks. They will travel on a highway that Airbus had to widen to accommodate the oversize loads. The trucks will travel only at night when the road is closed to other traffic. The trip will take three days, so they've had to build big roadside ``parking lots'' where trucks will sit during the day.
Data: Airbus
(available online)
New Technology In the A380
Some Airbus factories report that A380 components are being produced with well below half the rate of flaws on earlier planes
-- Next-generation composite material on the upper fuselage shell is reinforced with glass fibers, making it lighter and more durable than existing composites.
-- Wingbox made of plastics reinforced with carbon fibers weighs 1.5 tons less than the traditional aluminum design.
-- Extra-high-pressure hydraulic system, similar to systems now used on military planes, cuts weight by using narrower pipes and less fluid.
-- Updated engine design will meet strict noise-control requirements, but add more than a ton to aircraft weight.
-- Cockpit has new safety systems including GPS-guided "moving map" of each airport to aid pilots taxiing to and from runways.
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