Airbus' Gallois Retaliates At Boeing Interview

It ain't easy being Airbus these days. Particularly for Airbus Chief Louis Gallois, who went on defense Saturday after reading an interview Friday with Boeing Chief Executive James McNerney in the French daily Le Monde that "we still don't know what this model (A350 XWB) will be like." McNerney went on to say that Airbus needs more time to precisely define the characteristics of the XWB.

Gallois disputed Boeing's contention that designers continue to work on the revamped A350 XWB, asserting that customers would not have gambled on the midsize, long-range plane if they didn't know what they were getting, reported the Associated Press.

"It's wrong, clearly," said Gallois. "It's completely unfair to say that. When we have customers like Finnair, Aer Lingus and Qatar Airways, it's because the airplane is completely defined."

And, in an unexpected change of strategy, Gallois said that being the best company - not the biggest - is the Airbus goal.

All of this is occurring ahead of the Paris air show that opens Monday.

And Behind The Scenes, Steven F. Udvar-Hazy

Hazy, founder and chief executive of Los Angeles-based International Lease Finance Corporation is perhaps the most influential individual in the airline industry, was the focus of a New York Times story last month. And he was the force behind Airbus' costly $8-10 billion redesign of the A350 twin-aisle midsize jet when he announced before a stunned crowed at an industry gathering last spring that he found the design lacking.

His comments, almost overnight, killed the original design. However, they came after months of private discussion with Airbus execs in which Hazy complained that the proposed A350 was just a "warmed up" version of an existing plane and that its wing design made it too slow, as ANN reported.

Airbus executives, however, did not want to spend billions to overhaul the A350, as they were already plowing billions into developing the A380.

"I said they needed a new design," Hazy recalled. "And they said, 'Well, that's easy for you to say, Mr. Hazy, it's not your money.' I felt Airbus was paying attention, but was not embracing our ideas. I was so frustrated with Airbus because they were stalling."

Once Hazy publicly criticized the A350, two crucial customers, Singapore Airlines and Emirates, joined in and at the Paris Air Show a few months later, Airbus was scrambling to unveil the newly designed A350 XWB, extra wide bodied, as reported by ANN.

"Not to put too fine a point on it, but in our industry, Steve Hazy is God," said Edmund S. Greenslet. "No one has more influence than he does. He has an enormous impact on how manufacturers design their planes. He's the financial engine for airlines around the world."

Hazy has a fleet of 824 Boeings and Airbuses, with 254 more on order, dwarfing any airline in the world. He owns more planes than industry leader American Airlines, which has 679, and more than the combined holdings of Air France (265), Lufthansa (245) and British Airways (239).

"He leads and the market follows," said Jon Kutler, president of Admiralty Partners, a Los Angeles investment firm specializing in aerospace. "He's been responsible for commercial aviation trends and what comes off the assembly line."

Hazy is not shy about telling Boeing and Airbus what to build.

"We are saying to the manufacturers, 'Here's what the plane should look like.' Our loyalty is to the airline industry that serves the public, and the product has to be optimized for the airlines and not for the manufacturers. We are thinking about what the customer and what the industry need 20 years from now."

At the moment, Hazy has orders for up to 20 new A350s, but the contract will not be complete until the final design is set, at least to his satisfaction.

Do not think that he uses his not-insignificant leverage just against Airbus; Udvar-Hazy also lobbied Boeing to create an extended-range version of its popular 777.

Back To The Paris Air Show

As it stands, Airbus has 13 firm orders, compared with 584 orders for Boeing's fast-selling Dreamliner 787, due to be shipped to its first customer next May.

Gallois, who is also co-chair of Airbus parent EADS, said he expects to book more firm orders by the end of the air show for the A350 XWB.

A preliminary announcement for 80 A350 jets by Qatar Airways could be finalized; the weeklong air show ends June 24.

Airbus won its first firm orders for the A350 XWB back in March, when Finnair agreed to convert its nine orders for the previous version of the A350 to the new upgraded plane and order two more. Earlier this month, Aer Lingus Group announced an order for six A350 XWB aircraft.

And while Boeing reclaimed the top sales spot last year, earning more orders than Airbus for the first time since 2000 with the introduction of the Dreamliner, tt may reclaim the title of the world's largest plane maker, classed in terms of deliveries, next year when it starts shipping the 787. The A350 XWB will not be available until 2013.

Again, and in a clear change of strategy, Gallois said that being the best company -- not the biggest -- is the Airbus goal.

"I don't think that our target is to sell more airplanes than Boeing," he said. "Our target is to be the best company and not the biggest. I think that's a change from the past. I don't care if I have 45, 48 or 52 percent of the market."

To add to its challenges, Airbus is suffering from the weak dollar -- the currency in which it sells planes. Gallois called on European Central Bank chief Jean-Claude Trichet and Europe's bankers and politicians in an attempt to talk down the euro to help exporters.

Gallois claims Airbus loses $1.339 billion every time the dollar weakens 10 cents against the euro.

"I think the politicians, the bankers, the central bank could express their view on the value of the money and it's not without influence," he said. "If the value of the euro is still increasing, it will oblige us to take new decisions on our industrial setup."

Gallois declined to give more details about the consequences of the overly expensive euro. Airbus sets its profit forecasts at an exchange rate of $1.35.

Boeing's McNerney noted that exchange rates have little impact on Boeing because its costs and sales are both in dollars.

FMI: www.airbus.com; www.boeing.com, www.ilfc.com