Boeing's New Tailwind

On Dec. 7, 2003, Boeing executives arrived in Dubai for the city's biennial air show--and they were hoping for some good news. After all, the company's profits and stock price were slumping, and with 13 years since the last new-model launch, its product lineup looked stale. But the worst headline was yet to come: by the year-end, Boeing would, for the first time, deliver fewer airplanes than rival Airbus.

What a difference a couple of years makes. Boeing returned to Dubai last week on a roll. On Nov. 10 a long-range 777 flew 13,422 miles in one shot, shattering the distance record for commercial flight. The company's stock price had nearly tripled in the past two years. By Thanksgiving, the Dubai show was over--and, boosted by 138 new sales, Boeing's order book had swelled to 801, which will likely top its European adversary's 2005 tally by more than 100 jets.

For a time, Airbus looked too tough to beat. It made a bold bet with its A380, a new double-decker "flying cruise ship," designed to ferry 555 passengers between major hubs. But Boeing believed carriers would move to offer more frequent nonstop flights using smaller jets and avoiding big airports. So it rolled out the 787 Dream-liner, set to enter service in 2008. The 250-seater's selling point: an ultralight design that lets it fly nonstop from Los Angeles to Sydney and burn 20 percent less fuel than other planes its size.

The timing was right. With global passenger traffic rising fast, airlines have gone on a shopping spree--and the high cost of oil is now driving many carriers' buying decisions. Consider, for example, the companies' long-range jets. Airbus's A340 has four engines; Boeing's 777 has two. The result: the Boeing burns 24 percent less fuel per seat mile (and typically outsells its European counterpart 10-1). According to Boeing execs, efficiency also explains why its flagship 787 Dreamliner has doubled Airbus's A380 order total. "There's no question that the high-fuel-price environment has been extraordinarily good to us," says Nicole Piasecki, the company's VP of marketing and business strategy.

Meanwhile, Airbus is losing altitude. In June, the company acknowledged that production difficulties have delayed delivery of the A380 from mid-2006 to early 2007. What's more, its direct answer to the 787, the A350, won't hit the market until 2010, two years after the Dreamliner. "They've got a good mousetrap there," says Airbus's chief salesman, John Leahy.

Who will win in the long run? That depends on how you define victory. Boeing once hoped to fill two thirds of all aircraft orders. But now it may celebrate any year it captures more than 50 percent of the market. "Both companies are too good to be permanently eclipsed," says Ed Greenslet, editor of Airline Monitor. "Some decades, Boeing will have the best products; some decades, it'll be Airbus." But for now, Boeing is enjoying the wind at its back.

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