Airbus gets tentative green light for superjumbo

"The supervisory board of Airbus Industrie has decided to authorise the Airbus management to approach airlines interested in the A3XX family at top level to get a clear indication about (their) commitment," Airbus said in a statement following its board meeting.

The board’s authorisation gives the consortium an opportunity to get strong indications of airline interest in the plane without fully committing to its development.

Until now, demand for the $200 million-plus aircraft has remained in question, with few top airlines expressing more than tentative interest.

"They’re trying to get something more than warm feelings," said Commerzbank Brian O’Keefe.

The consortium hopes the A3XX, which will cost an estimated $10-12 billion to develop, will supplant arch rival Boeing Co’s popular but ageing 400-plus seat 747 Jumbo.

Boeing has argued that market demand does not justify construction of a larger airplane such as the A3XX, but has broached the possibility of developing a stretch version of the 747 should such a market need emerge.

No decision on assembly site

Airbus said that no decision had been reached on where the A3XX would be built, noting that two "highly qualified sites" — presumably Toulouse and Hamburg — were still under consideration.

Industry sources told Reuters after the board meeting that this decision would likely to come in tandem with a formal launch decision in the first half of 2000.

Airbus said the board had decided the technical specifications of the plane — fuel consumption, design details and weight — had been achieved according to airline requirements and that the plane’s economic viability had also been confirmed.

It has promised airlines that its superjumbo will have 15 percent lower operating costs than the Boeing 747, which currently enjoys a monopoly of the jumbo aircraft market.

The planemaker also said financing agreements with investing participants and European governments had yet to be finalised.

Airbus partners will be securing 60 percent of the funding for the project and other risk-sharing entities the remaining 40 percent. Of the total, no more than a third can come from Airbus governments.

A costly project with financial risks

The A3XX project represents by far the most costly project ever undertaken by the consortium since it began delivering planes in the early 1970s.

The idea of building a UHCA, orultra-high-capacity-airplane, to compete with the 747 has been circulating within the corridors of Airbus headquarters in Toulouse for roughly a decade, but the A3XX has emerged in blueprint form only in the past few years.

And in recent months, the announced mergers of Airbus partners Aerospatiale Matra, DaimlerChrysler Aerospace and Spain’s Casa to form EADS have given the program an added boost.

Still, demand for the plane is uncertain. Analysts have said Airbus must deliver well over 500 of the planes during the next 20 years to avoid financial difficulties and in excess of 650 planes to ensure financial success.

An informal survey of top global airlines conducted by Reuters over the past week revealed that many companies — especially in Asia, where the lion’s share of the demand is expected — remain lukewarm on the project.

And in Europe, top airlines such as Air France and British Airways have been cutting back on their jumbos of late, opting instead for more frequent flights in smaller aircraft.

A recent two-day Airbus-carrier working group in Denver also showed that inerest in a freighter version of the plane, which Airbus has planned for 2007, might be stronger than interest for a passenger version.