Fortunes turn: Now it's Boeing gaining on Airbus problems

03/22/2010 10:30 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

It’s always good news for a company when a competitor admits that it has potential issues with a technology crucial to a new product.

This time the competitor making the admission was EADS, the parent of Airbus, telling Wall Street analysts On Friday, March 19, that while it is convinced that it is still on schedule to deliver its first A350 in 2013, it has still not solved all the potential issues with the composite materials that are critical to reducing the weight of the air craft and increasing its fuel efficiency.

And the company getting this good news was Boeing (BA), which has struggled to get its own lighter weight, more fuel efficient plane, the 787, off the ground. (Boeing had its own composite problems with the 787.) Boeing’s conducted its first test flight on the 787 in December 2009. The third 787 to come off the assembly line completed its initial test flight on March 14,

On March 20 Boeing announced plans to raise production on its existing 777 and 747 planes because of increasing demand. The company will increase production of 777s to seven a month from five in mid-2011 instead of in early 2012 as previously planned. Production for the 747 will step up in mid-2012 instead of in mid-2013. U.S. airlines are returning to profitability and that means more orders. And Boeing is picking up market share in Asia and the Middle East, said Boeing CEO Jim Albaugh.

The key to keeping those market share gains—and increasing them—is the relative success of the 787 versus the Airbus 350.

At its meeting with analysts EADS stuck by its conviction that the Airbus 350 is still on schedule—even though delays have already eaten through three months of the buffer in the delivery schedule.

But the A350 certainly sounded like a program in trouble.  Engineers at Airbus have problems with three aircraft—the next generation A350, the new jumbo A380, and the 400M transport --to resolve simultaneously. The A380, for example, has been plagued by electronic and other systems problems that have forced the grounding of a troublingly large number of planes. The A380 was supposed to take on Boeing’s 747 but orders have stalled at roughly 200 planes. Airbus managed to deliver just 10 A380s in 2009. That was down from a promised 12, which itself was down from an initial target of 45.

It’s hard enough to fix problems with one aircraft. Fixing three at the same time would stretch any engineering staff.

Airbus has been able to make hay on Boeing’s problems with the 787. 2010 is shaping up as the year when the two companies reverse roles.

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