Airbus parent EADS decided Friday to go ahead with a new mid-sized jetliner to strike back at Boeing in their fight for market share and restore pride shattered by delays to its A380 superjumbo.
The pan-European company said its board had agreed after months of uncertainty to build a re-engineered version of the A350, the "extra-wide-bodied" A350 XWB, after an earlier version flopped in competition with Boeing's 787 Dreamliner.
The market for such 200-350-seat jets is estimated in the thousands, compared with 149 net sales for Airbus's 555-seat A380 whose deliveries have been delayed for two years.
The gap highlights a sharp reversal in the $50 billion cut-throat airliner industry Airbus shares with Boeing.
"EADS has taken the right decision," French Transport Minister Dominique Perbent said in a statement.
"The commercial success of European civil aviation depends on maintaining a full range of latest-generation aircraft ... to meet very strong growth in traffic expected in coming years."
The go-ahead to build the plane is a victory for Airbus CEO Louis Gallois, who salvaged the project from management turmoil and collateral damage to Airbus finances from the A380 crisis.
It also completes a U-turn for Airbus, which once dismissed the mid-sized market to gamble on size with its 555-seat A380.
EADS said the A350 would enter service in 2013 compared with 2008 for the 787 Dreamliner, but promised it would be "a step ahead of its competitor."
The A350 XWB will be wider than a 787 though narrower than Boeing's current 777, another competitor.
Cost and funding
EADS did not disclose the cost of the project, which industry analysts estimate at some �10 billion ($13 billion) compared with an original budget of just over �4 billion. Most will be met from cashflows, EADS said.
Both the cost and the way the project is funded are sensitive issues, given pressure from the United States over state aid and friction among shareholders including the French government, German car firm DaimlerChrysler (Charts) and French media firm Lagardere.
The United States has complained to the World Trade Organization about the past use of state development loans and has said any launch aid for the A350 is "unacceptable."
The European Union is counter-suing the United States over defense contracts and tax breaks it regards as aid for Boeing (Charts).
The Financial Times reported that the financing package to be presented to the board included up to �4 billion in financing backed by France, Germany, Britain and Spain.
"We're seeking further information from the European Union. Obviously, the reports of �4 billion in state-guaranteed funds are not encouraging," U.S. Trade Representative spokeswoman Gretchen Hamel said.
The earlier design for the A350 called for government loans of a little over �1 billion.
Anxious to spread the financing, EADS said the deal would bring new "risk-sharing partners" into Airbus, referring to deals that bring in outside investment in return for a share of the gains and in some cases a share of the workload and jobs.
Airbus has offered China a 5 percent share in the A350.
Airbus chief Louis Gallois told Reuters last week the planemaker would also outsource �1.8 billion worth of work previously done inside its factories to help cut cost.
"The A350 XWB is going to be financed predominantly from company cash flows, with strong contribution from the Power8 program and from risk sharing partners," EADS said.
Airbus is in the midst of a �2 billion restructuring plan called Power8 to help overcome cash shortages left by a two-year delay in deliveries of the A380.
Airbus faces penalties to airlines and deferred revenues on the A380, and will lose its crown as the world's top-selling jetmaker this year after Boeing took full advantage of its rival's hesitation over the A350 to hard-sell 787 Dreamliners.
