Op-Ed: Airbus Should Defer A350, Focus on A320 Replacement
By Giovanni de Briganti
PARIS --- The board of EADS is to decide shortly whether to launch full-scale development of the A350XWB project, the summarily redesigned A350 with which Airbus hopes to compete with Boeing’s very successful 787 Dreamliner, but which has so far attracted little interest from airlines.
The decision is a momentous one for Airbus, as A350XWB development would cost $10-12 billion that Airbus does not have and that its shareholders are reluctant to invest. After their dismal showing in the past year over A380 production and CEO retention, both Airbus and EADS are doomed to succeed, and a wrong step at this point would probably more than simply threaten their long-term survival.
So far, the case made for A350XWB development boils down to a single argument: the medium-capacity, medium-haul market at which it is aimed represents 40% of the total commercial aircraft market, which Airbus cannot afford to ignore.
Some would argue that Airbus cannot afford not to ignore it. This argument hardly justifies investing $12 billion to develop an aircraft that will reach the market 5-7 years after Boeing’s Dreamliner, and that, in the form unveiled at July’s Farnborough air show, brings nothing new to the party. Chances are that, given the pressing need to add capacity, airlines will prefer buying 787s today rather than waiting years for the A350XWB especially as, given the air transport industry’s cyclical economy, the current up-cycle might well be over by the time the A350XWB is delivered. This has happened before.
Simple arithmetic shows that, even if it concedes 40% of the market, Airbus would still have the other 60%, off which it could live comfortably at least temporarily. The A380, which is proving to be a remarkable aircraft, will dominate the market for large, long-range aircraft, where Boeing has nothing to compete with, much as the A320 family already dominates the short-haul market.
But the A320 will have to be replaced. Why not do it now, while Boeing is focused on the Dreamliner and 747-8 freighter? Boeing will not be able to launch its 737 replacement program for several years, and by launching an A320 replacement today Airbus would gain a substantial head-start in a market segment which it knows to be both profitable and growing. And a much better business plan to take to its bankers and shareholders.
This would also turn the tables on Boeing, which when it launches its 737 successor would be in the same unenviable position as Airbus is today: having to find telling sales arguments to push an aircraft that is second-to-market.
It also is worth noting that the A380/Dreamliner competition has still not been settled. Despite the Dreamliner’s bulging order book, it is by no means certain that, in the long run, airlines will always prefer point-to-point flights with the Dreamliner to hub-and-spoke flights with super-large aircraft like the A380, and this even though Airbus seems to no longer believe its own marketing pitch.
Having thus nailed down the low (A320 successor) and high (A380) ends of the market, Airbus in 5 or 10 years would find it much simpler to revisit the issue, and to come up with a winning design with which to compete for the central 40% share of the market - and at the time of its own choosing.
The secret to industrial success is bringing to market the right product at the right time. Stubbornly plowing on with the A350XWB is not.
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Op-Ed: Airbus Should Defer A350, Focus on A320 Replacement
