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Mon, Jun 16, 2003

Boeing Takes Off The Gloves At Paris

Accuses Rival Airbus Of Being "Irresponsible"

Since the horrific downturn in the aviation industry began on Sept. 11, 2001, Airbus has been "irresponsible" in not making more cuts in production. That word from Boeing's Alan Mulally, CEO of the company's commercial aircraft division at the Paris Air Show this weekend. Mulally says the resulting glut of high-end commercial aircraft on the market could hurt the industry for years to come.

The Financial Times of London quotes Mulally as saying, "When demand went down, we dramatically reduced production to support our customers, otherwise you hit [aircraft] residual values and you delay the recovery."

Airbus Set To Overtake Boeing Production

Airbus deliveries peaked at 325 in 2001, before the terror attacks involving hijacked commercial jets on New York and Washington. Last year, Airbus delivered only slighly fewer aircraft - 303. In 2003, The Financial Times quotes Airbus CEO Noel Forgeard as predicting the company will again deliver more than 300 aircraft to customers worldwide. Boeing expects to deliver just 280 commercial aircraft this year. That means Airbus will, if the forecast holds, outpace Boeing for the first time in history.

"Everything leads us to believe that we can deliver 300 planes this year. We believe we can make the 300," Forgeard (right) said. "We will also be around 250 orders for the year. The market is better than we expected and our market share has increased much more than we anticipated."

But Boeing's Mulally has chopped production in half, laid off more than 35,000 workers and is actively shopping for community financial particiaption wherever it contemplates setting up shop. In other words, Boeing has done some considerable belt-tightening. The question at Paris this year is: Did Boeing leave orders on the table - orders picked up by chief rival Airbus?

Pointing directly to the Airbus challenge, Mulally (right) said the European consortium is creating a glut of heavy iron on the market, one that will create "huge problems in pricing and that hits the industry too."

The forecasts from both Mulally and Forgeard do have their bright spots. Both see the airline industry recovering in 2004 and 2005, reaching RPMs similar to those achieved during 2000. Even better news for the mega-rivals: of the 2000 aircraft mothballed by airlines in the Mojave Desert since Sept. 11, 2001, only "500-600 will be restored to service," according to Mulally. The rest will bake in the sunshine, victims of 9/11 and of the resulting need to streamline and simplify fleet operations.



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