Airbus Super-Sizes

TOULOUSE, France —  Richard Branson came calling recently to check on his order for six super-jumbo jets from Airbus. He liked what he saw.

“It’s an absolute dream,” Branson gushed, looking over a mock-up of the mammoth A380.

With two full-length decks connected by a staircase, and a wingspan the length of a football field, the A380 will be able to hold as many as 800 passengers. It will be so big it could virtually swallow Boeing Co.’s 747, which typically comes with 450 seats.

Weighing in at 1 million pounds and costing $250 million, the new Airbus jet will be the world’s largest passenger aircraft.

“It’s going to be a beautiful plane,” said Branson, chairman of Virgin Atlantic Airways, “and it’s going to have a lot of wonderful things in it.”

As Branson was cooing over the A380 in southern France, archrival Boeing was in a state of crisis in Chicago. It fired its top finance executive for ethical misconduct over a Pentagon contract and, seven days later, accepted the resignation of Chairman and Chief Executive Philip M. Condit. Then the Air Force announced it would delay signing an $18-billion contract for Boeing aerial refueling tankers, pending a review of the fired finance executive’s behavior.

The contrasting scenes on opposite sides of the Atlantic tell the story of a stunning reversal of fortune. This year, Europe’s Airbus will for the first time deliver more commercial airplanes than Boeing, taking 51% of the market -- up from about 18% less than eight years ago.

Moreover, Airbus has plunged ahead with production of the A380 and is off to a fast start with 129 orders from carriers including Singapore Airlines, Qantas, Air France, Lufthansa and Korean Air Lines, in addition to Virgin Atlantic, all of which aim to fly the jet out of Los Angeles International Airport. The first takeoff is expected in 2006.

Boeing hasn’t launched an aircraft since 1990. The company is debating whether to move ahead with the mid-size 7E7. The board is scheduled to meet Dec. 15 and vote on whether to begin marketing the 7E7 to airlines, the first crucial step to launching the jet.

Boeing “reminds me of General Motors Corp. in the 1970s,” said Jon B. Kutler, president of Quarterdeck Investment Partners, an aerospace investment bank. “They dominated the marketplace so they looked down on foreign competition. Sure enough, the foreign competition snuck up on GM, and look where they are.”

While Boeing in the late 1990s was buying defense firms to diversify and mitigate cyclical gyrations in the commercial aircraft business, Airbus kept spending money on developing and marketing new planes.

“They were investing in the future while Boeing wasn’t,” said Richard Aboulafia, senior aviation analyst for aerospace research firm Teal Group.

Airbus is making its biggest bet yet with the A380, which could complete the company’s transition into a dominant force.

Development costs for the A380 are expected to exceed $12 billion. The complexity of assembling the aircraft, unequaled in the aerospace industry, showcases how far Airbus has come since its creation in 1970 by a consortium of European companies. Today it is 80%-owned by French-based European Aeronautics Defense & Space Co. and 20% by British BAE Systems.

The building of the A380 involves one of Europe’s largest industrial mobilizations since post-World War II reconstruction, with more than 1,500 suppliers in 30 countries making parts. Among them are several hundred U.S. suppliers, including about 100 in the Los Angeles area.

Critics in Congress contend that Airbus, which they say is heavily subsidized by European governments, is making a token gesture to give contracts to U.S. companies. Airbus says American contractors are doing significant work. In fact, Airbus says, 50% of all the work on the A380 is being done by companies in the United States.

One of those is Hitco Composite Structures Inc. in Gardena. Hitco, a Boeing parts supplier for 25 years, for the first time is making components for Airbus -- a composite tail section for the A380.

“We view this as just the beginning,” said Paul Pendorf, Hitco’s president. “We want to earn our way onto other [Airbus] programs.”

Thanks to an increase in U.S. defense spending and the new Airbus contract, Hitco’s payroll has increased to 300 from 230 in the last year, Pendorf said.

Wherever they are made, A380 parts are shipped to one of four “engineering centers” in Germany, Spain, France and Britain, where major modules are partially assembled, such as a wing section with all the necessary wiring and components. From there, the pieces are shipped, flown or trucked for final assembly in Toulouse, where about 1,200 workers will snap them together in a massive hanger capable of fitting 15 football fields.

Some pieces are so large -- one wing section stands nine stories high -- that a ship and a barge had to be built to transport them and a separate port constructed in France to offload them. There they are transferred to barges, with variable ballasts, to allow the pieces to pass under a historic 18th century bridge in Bordeaux on the way to Toulouse. And long stretches of road in the French countryside were widened so that a truck convoy could carry wings to the assembly plant.

Will the A380 be the jet that puts Airbus permanently ahead in the race with Boeing? Many industry analysts say it’s more likely that the duopoly will continue, with market share vacillating between Airbus and Boeing.

“Boeing won’t dominate anymore, and Airbus won’t either,” said Adam Pilarski, chief economist for McDonnell Douglas Corp. before it was acquired by Boeing in 1997. “It will be a happy equilibrium.”

Airbus executives, who for years vowed they would put Boeing out of business, now insist that they have no intention of dominating the commercial jets market. That, analysts say, is a shrewd posture to assume, to avoid any possible political backlash from the United States.

The U.S. remains the biggest plane market but has been frustratingly hard to crack for Airbus. With the exception of cargo carrier FedEx Corp., no U.S. airline has placed orders for the A380.

“Are we going for 80% of the market? We are not,” said John Leahy, Airbus’ chief salesman. “You’ll see Airbus and Boeing drifting back and forth between 40% to 60% of the market.”

One thing is certain: For the first time in decades, Boeing and Airbus have completely different views of the commercial aircraft market.

Boeing believes that there will be increasing demand for direct flights to faraway destinations from small, regional airports, such as John Wayne Airport in Orange County. Travelers, Boeing reckons, don’t enjoy the hub-and-spoke system, which has them taking short flights to major airports and then continuing on.

Since large airplanes such as the 747 can’t land at smaller airports, Boeing started work on the 7E7, a mid-size jet with about 250 seats that can fly long distances and land on short runways.

At the same time, Boeing is expecting a consumer backlash against the A380, which could be seen as a gargantuan flying cattle car crammed with cranky people.

“What’s in it for me to sit on an airplane with 500 other people, wait for my bags with 500 other people, check in with 500 other people?” Gordon Bethune, chief executive of Continental Airlines, said in an address to the National Business Travel Assn. last summer.

“I don’t think the A380 is going to sell other than to cargo carriers in the U.S.,” he added. “Nonstop is the real answer -- not bigger.”

Branson, and a lot of other airline executives, disagree. For long-haul, international travel, they insist, the A380 will be ideal, especially considering that many international airports are running out of space and gates are in short supply.

Airbus predicts that there will be demand for at least 1,500 of its super-jumbos.

Still, Branson acknowledged during his visit to Toulouse, the A380 faces significant design and marketing issues.

“The challenge is whether we can give the economy class a more wonderful experience, so that passengers can get out of their seats and do more than just go to the lavatory,” he said.

The buzz in the industry is that Virgin Atlantic and other carriers will, in planning the interior design, consider such amenities as casinos, fitness centers, full-scale bars and duty-free shopping areas.

So far Airbus doesn’t seem to be having problems getting customers. Recently, it won a contract for five A380s from Korean Air Lines -- a carrier that historically has bought mostly Boeing planes. Airbus says it needs to sell 250 A380s eventually to break even.

Despite one of the worst travel slump in decades, “there has been no postponements or delays” in orders for the A380, said Airbus Chief Executive Noel Forgeard. “Everything is going well and on schedule.”

It hasn’t been without some hitches. Because of the plane’s record size and weight, airports must widen taxiways, reinforce bridges and renovate terminals. Heathrow Airport in London will spend about $750 million to make the changes necessary to accommodate the A380s flown by Virgin Atlantic, British Airways, Singapore and others.

Airbus said most major airports had begun making the improvements. Los Angeles International Airport is an exception -- and that has caused considerable hand-wringing, because LAX is expected to have the most A380 flights of any airport in the first years.

“Los Angeles has been the slowest to get their act together and get ready for the A380,” said Branson, who has urged Gov. Arnold Schwarzenegger to intervene.

Branson is particularly worried that his A380 will have to park so far from the Virgin Atlantic terminal that passengers will have to be transported to the airplane by shuttle bus, which he calls “unacceptable.”

Boeing probably likes that scenario. If other airports prove slow to upgrade, airlines may be reluctant to buy A380s, which could give Boeing an upper hand if it decides to go ahead with the 7E7.

“Everything,” said Aboulafia of the Teal Group, “could be flipped around again.”