Buffeted by east winds

THERE was a dazzling array of super-advanced jetliners on display at the Singapore air show last week. Airbus Industrie brought the A3XX, a 550-seat, 80ft-high behemoth with space for a gym, bar and restaurant. The aisles were even wide enough to allow two people to pass each other with ease. Meanwhile, Boeing showed off a new model of its 777 that can fly for 18 hours non-stop, with space for 42 bunks below deck.

The trouble is, neither of these marvels has yet made it out of the briefcases of Boeing and Airbus planners. Locked in a fierce one-on-one struggle for market share, neither company is yet willing to invest billions in risky new planes. Economic turmoil in Asia further clouds the outlook, removing the comfort of a secure, fast-growing market.

"It's not like selling toothpaste. You can't just put the stripe in and then take it out if it doesn't work," said Joe Ozimek, Boeing's director of product marketing. "These are $150m [pounds 94m], $200m aircraft we're talking about."

Just two years ago it seemed that both planemakers were intent on going ahead with giant jetliners. Many observers expected Boeing to launch its own 550-seat "stretch" 747 at the 1996 Farnborough air show. Months later Boeing scrapped its $7bn plan, saying it hadn't yet won enough commitments from airlines. That opened the door to Airbus. But the four-nation European group's commitment to a rapid launch of the $10-$12bn A3XX has gradually appeared to wane; and it seemed even more tenuous at the Singapore air show.

Airbus's managing director Jean Pierson said the company's engineers hadn't met their targets for the superjumbo's operating costs, which is intended to be 15 to 20 per cent cheaper to fly than current jetliners.

While it was once planning to start making deliveries of the jetliners in 2003, Airbus is now pencilling in 2004. But if the engineers don't meet their targets by the end of this year, Mr Pierson said, the project will be delayed again.

Some analysts say a date as late as 2010 is more realistic now that the Asian crisis has raised questions about the project's viability, which depends on convincing governments and outside investors to stump up two- thirds of its costs.

"You just can't see there being a business case for it right now," said Chris Partridge, associate director of aerospace finance at Deutsche Morgan Grenfell. "Asian investors are unlikely to be sprinting to the project."

Aside from British Airways, which is based at an already overloaded Heathrow, the superjumbo is intended primarily for super-congested routes across Asia. Carriers such as Japan Airlines System could use a 550-seat plane even on domestic flights, and landing space is scarce at crowded hub airports such as Tokyo's Narita.

But currencies in nations from South Korea to Malaysia plunged late last year, spurring a dramatic drop in tourist travel across the region and downward revisions of growth forecasts.

Once expected to account for 50 per cent of global passenger travel by 2010, surpassing the US as the biggest air market, Asia's share is now forecast to remain at 35 per cent or even fall to 33 per cent by that time, the International Air Transport Association said recently.

Still, even a decade is a short time in the aerospace industry. For all the speed of its products, change comes only incrementally. It's one of the few industries where the typical considerations - costs, the market, and design - intersect with such high stakes.

Copyright: IOS & Bloomberg

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