LONDON, England (Reuters) -- Cost overruns and political bickering will be set aside Tuesday at Airbus as the Toulouse-based planemaker unveils its mighty A380 double-decker, the biggest airliner ever built.
French President Jacques Chirac and British Prime Minister Tony Blair are among more than 5,000 guests invited for a first glimpse of the A380, which some airlines are betting will reshape the industry.
Customers have committed almost $40 billion to buying the 555-seat plane, expecting it to lower operating costs and fatten profits, battered in a slowdown since 2001.
"It's the first seriously radically new plane for a generation," said Paul Moore, spokesman for British airline Virgin Atlantic, which has six A380s on order.
Airbus is throwing a party despite a less festive mood behind the scenes.
Chief Executive Noel Forgeard is leaving after waging a feisty public bid to become co-CEO of parent firm EADS, leaving questions about who will lead Airbus and sparking ill will within EADS.
"I didn't think that human nature was capable of such baseness," Philippe Camus, the man Forgeard will replace at EADS later this year, told reporters last week.
The A380 is also causing headaches as it runs 1.45 billion euros ($1.9 billion) over budget and battles a weight problem that threatens to undo its promised cost-saving performance.
While not an uncommon problem for new planes, the stakes are higher with the A380, which at a list price of $260 million is an expensive gamble.
Airbus' suppliers are also feeling the pinch, with British engineering firm Cobham among those running over budget on work to develop A380 equipment.
Virgin Atlantic said delays in developing some equipment contributed to its decision to delay its A380 deliveries.
The plane will dwarf rival Boeing Co.'s 416-seat 747-400, for four decades the reigning heavyweight. It will accommodate more than 800 if airlines use all-economy seating.
"The aircraft, which is enormous by any measure, should be a 'game-changer' in the long-haul market," J.P. Morgan analyst Chris Avery said in a recent research report.
The risk for Airbus is that it must deliver on the enormous promise of the plane, which will take its first flight in March and faces a year of flight trials.
"A lot of the good news has been factored into EADS shares," said one London-based analyst.
Airbus needs to keep the A380 on schedule, not only to satisfy customers but also to allow its engineers to turn to building its planned A350 mid-sized model and spearheading Europe's planned military transport plane, the A400M.
Airbus must also meet its bullish forecasts regarding demand for the A380 and recoup the more than 12 billion euros that the plane will cost to create.
The planemaker foresees demand for 1,650 planes in the A380 category above 450 seats over the next 20 years.
Rival Boeing Co. expects demand for less than a third of that number as it mulls a stretched version of the 747.
J.P. Morgan's Avery said Airbus would need to sell 248 of the planes just to break even, versus the 149 commitments collected so far.
Adding further pressure is a recent agreement between U.S. and European negotiators to work out a pact, which is likely to make it harder for Airbus to receive state funding.
On Tuesday, Airbus will put all such concerns aside to show off not only of the most talked-about plane in years, but also a track record that has helped it topple Boeing as the biggest commercial aircraft maker.
Airbus topped Boeing in 2004 both in deliveries and new orders.
If all goes to plan, the A380 might kill the 747 jumbo and become a must-have plane for airlines on long routes linking Asia with Europe and the United States.
The risk is that the public balks at the plane, equating a bigger plane with longer airport delays.
If they do, airlines may find it a plane that is hard to fill and therefore not the cost-saver they had hoped for.
Of Airbus' more than 200 customers, only 14 have committed to the A380, so it is clear that many are watching to see what happens.
Edited by Fluffybunny, 17 January 2005 - 07:08 PM.