Flying High with Airbus

Some big orders give the European wide-body a boost

American commercial planemakers have long dominated the world skies, but their near monopoly is under assault. Last week The Netherlands' KLM and West Germany's Lufthansa, which up to now have operated predominantly U.S.-made fleets, both announced important buys of wide-bodied, twin-engined planes built by Airbus Industrie, a consortium backed by four European governments.

KLM's order, for ten short-range A310s (with options for ten more), is the largest it has ever made. Lufthansa's purchase of 25 of the planes (and options for an additional 25) is the biggest order the decade-old consortium has landed. Equally significant, the sale marks the end of Lufthansa's overwhehning dependence on Boeing. Said Lufthansa Chairman Herbert Culmann: "We have no interest in turning a giant into a colossus."

While the Airbus consortium itself is not yet a giant, it is quickly becoming an important source of jobs as well as pride in Europe. Production at the final assembly plant in Toulouse, France, is scheduled to increase from 2.3 planes a month to six by 1982. The consortium's payroll will rise from 17,000 to 40,000 in the four participating countries, which divvy up the manufacturing in rough proportion to their Airbus ownership--37.9% for both France and West Germany, 20% for Britain, and 4.2% for Spain. The four have invested some $3 billion in the project.

Airbus sales did not begin to take off until last year, when Eastern Air Lines bought 23 of the $33 million A300s. Since then the backlog of Airbus orders has doubled, to $6.3 billion; today the firm accounts for one out of three sales of new wide-bodied planes. Indeed, since last year, it has sold almost as many wide-bodies as Boeing and more than McDonnell Douglas and Lockheed. These two companies have run out of steam because neither has launched a new model for the short-to medium-haul market. Says the consortium's French president, Bernard Lathiere: "Three years ago, there were three major companies in the [jumbo] market-Boeing, McDonnell Douglas and Lockheed. Today there are two--Boeing and Airbus."

Only 65 Airbuses are in service, but the consortium has 177 firm orders and 93 options from 21 airlines. It also has strong prospects for further buys from carriers that are not now customers, including Air Afrique, Britain's Laker Airways and Japan's domestic TOA. Lathiere insists that present customers alone assure the consortium of the 360 sales it needs to break even on the A300, the 251-to 336-seat prime Airbus model.

The A310, which carries 200 to 255 passengers, is a later model that will compete with Boeing's twin-engined 767, which will be used on short-haul routes in the early '80s. The first A310s are due to begin flying in 1983 for Swissair, which last month signed an order for ten planes. That was a key deal because Swissair has depended heavily on U.S. planes in the past, and Switzerland is not a member of the Airbus group or of the Common Market, and thus was under no visible pressure to buy European.

Popular with passengers and highly reliable, the A300s are also the most fuel-efficient commercial jets now flying, a result of their advanced engines and a "supercritical" wing that cuts aerodynamic drag. Airbus has also benefited from a fundamental change in world aircraft-sales patterns. U.S. airlines, which not long ago accounted for two-thirds of all airliner purchases, now make up only one-half of the market. European and Third World lines are growing fast, and they seem more inclined to fly non-American jets than U.S. carriers do. The Airbus consortium aims to sell at least 25% of the 3,000 or so short-and medium-haul jets that will be needed by the early 1990s.

Lathiere hopes the Airbus will redress an imbalance that has long irritated Europeans. Says he: "Europe buys 25% of the world's planes, but as manufacturers we get only 2% of the business. The U.S. plane industry will not suffer if its share of the world sales declines somewhat to 75%." Despite the burst of business for Airbus, Boeing has received 229 orders and options for the 767 and the 757. Moreover, before it made its Airbus buy, Lufthansa placed a $1.2 billion order for 32 Boeing 737s and 24 options, the largest plane deal ever made by a European carrier. Since Airbuses are fitted with U.S.-made engines and electronic gadgetry, one out of every three dollars spent on the European planes ends up in America.

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