The SanityPrompt

This blog represents some small and occasional efforts to add a note of sanity to discussions of politics and policy. This blog best viewed with Internet Explorer @ 1024x768

Thursday, April 28, 2005

It Flies! It Flies!!!!!

Airbus successfully conducted a test flight of its new Megaliner the A 380. So we know it gets off the ground. The bigger question proves to be, will it be a boon or bust for Airbus? Lately, things have certainly been going Airbus's way in the airplane wars. Boeing has been reeling as they watch sales plummet and Airbus surge ahead in global market share of new planes sold. The contest is interesting on so many levels. Here is a market dominated by just two players. One is privately held, the other is a government subsidiary. Americans claim that Airbus represents a violation of fair trade while Europeans point to the heavy support Boeing receives from US defense spending. And each has crafted very different visions of the future.

"The European Airbus consortium is counting on the A380 to help it keep its edge over Boeing, while the U.S. company says it believes the future lies in smaller long-range airliners....The A380, as long as eight London buses and with enough room on its wings to park 70 cars, heralds a new era in passenger travel, just as the supersonic Concorde jet set new standards by breaking the sound barrier in 1969.But Airbus faces a tough battle with Boeing and is still short of selling 250 of the A380s, which it says is the break-even point. Some experts say it will have to sell almost three times as many to make a profit."

Boeing thinks the future lies in mid range airplanes that will shuttle people directly between their destinations (hmmm, how easy is it to get direct flights rather than passing through hubs these days?) Airbus is betting that companies will want to run fewer long range flights and pack people in one plane. But they will have to sell 750 of those planes to start making money. That's a lot of Mega-liners and the project is already 1.45 billion in cost over-runs. Nevertheless, Airbus has out sold Boeing every year since 2001. What's interesting about this story to me is that while some argue government run organizations allow politics to cloud good business judgement, others argue that privately held companies with bad governance are likely to underperform when in the grip of bad management. In this case, both sides appear to be right and both organizational models appear to be failing investors and taxpayers. Another interesting question concerns how these planes will be configured by airlines.

"The double-decker A380, designed to carry 555 passengers but with room for more than 800, touched down smoothly almost four hours after soaring into sunny skies on its maiden flight above Airbus headquarters near Toulouse in southern France."

How many seats do you think American airlines will pack into those babies? My hunch is slightly more than 800.


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