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Airbus jet orders for 2005 hit record
(AP)
Updated: 2006-01-18 09:04

Airbus announced a record number of jet orders for 2005 on Tuesday, unexpectedly beating Boeing's tally for a fifth straight year, but the European plane maker fell behind its rival on order value as sales of its larger planes failed to keep pace. Airbus announced a review of its long-range A340 airliner in the wake of disappointing orders.

Toulouse, France-based Airbus unveiled a total of 1,055 net orders, trouncing its U.S. rival's 1,002, and said it delivered 378 airliners last year to Boeing's 290. Gross orders — which do not take account of cancellations — came to 1,111, the largest number ever booked either side of the Atlantic.

The Airbus figures defied predictions that the European plane maker would lose the lead in order numbers it took from Boeing in 2001, two years before pulling ahead on deliveries. In the 11 months to Nov. 30, Airbus had reported 687 firm orders.

"We had a very busy December," Airbus Chief Executive Gustav Humbert said at a briefing before Tuesday's announcement. Last year saw record demand for planes as air travel took off in many emerging markets, spawning a new generation of low-cost airlines, and existing carriers upgraded fleets to save on soaring fuel bills.

Airbus CEO Germany's Gustav Humbert poses next to a model of an Airbus A380 after a press conference in Paris, Tuesday, Jan. 17, 2006.
Airbus CEO Germany's Gustav Humbert poses next to a model of an Airbus A380 after a press conference in Paris, Tuesday, Jan. 17, 2006.[AP]
But Airbus lost its market leadership in value terms, after Boeing won 70 percent of global orders for larger, pricier planes. Humbert said Airbus' share of total order value, measured at catalog prices, shrank to 45 percent last year. It was 54 percent in 2004, according to Airbus figures.

"We're not happy with this situation," the Airbus CEO said, "and therefore we'll have a special look at this. But there's no need to panic — one year doesn't make a trend."

Airbus said its 2005 orders were worth $95.9 billion at list prices. According its stated market share, Boeing's orders came to $117 billion. Boeing spokesman Peter Conte declined to give precise figures but said the Airbus calculation was a "pretty good estimate." Neither company discloses actual prices agreed with airlines, which are often heavily discounted.

Boeing pulled ahead on catalog value because it achieved a better mix of widebody, long-range planes and cheaper, single-aisle regional jets. Boeing sold 455 of the larger planes last year, representing 44 percent of its orders, while Airbus sold 193 — just 17 percent of its total.

The average catalog price for a single-aisle Airbus A320 or Boeing 737 is close to $60 million, less than a third of the average list price for their widebody siblings, the A340 and the 777, which also generate higher profit margins.

Single-aisle planes accounted for 924 of the Airbus orders — many of them booked in a December surge of new business, boosted by China's purchase of 150 A320s during a visit to France by Prime Minister Wen Jiabao. The A340 attracted only 15 firm orders in 2005, while Boeing won 154 orders for its competing twin-engined 777s.

Humbert indicated he plans to review the A340, a four-engined jet that flies 380 passengers up to 7,500 nautical miles in the largest of its three versions.

"We can and will do better in the long-range field," Humbert said, insisting it was too early to discuss what changes Airbus might make, if any — ranging from a price cut to a substantive revamp or even a new model. "If we think something has to be done, then I will act very quickly, but nothing is on the table," he said.

Airbus has sold the A340 as a safer bet for long-haul flights over remote areas such as the North Pole, arguing that a four-engined plane is better able to cope with an engine failure and fly on to a safe landing elsewhere. But rising oil prices are making the superior fuel economics of twin-engined planes hard to ignore — and Boeing is rubbing its hands.

"When fuel prices are so high, there's no way Airbus can price an inefficient airplane attractively for customers," said Randy Tinseth, director of product and services marketing for Boeing's commercial jet division.

Orders for Airbus' long-range, fuel-efficient A350 — which enters service in 2010, two years after the competing Boeing 787 Dreamliner — also fell 28 short of the 200 target for the end of 2005. And Airbus is not expecting any slew of new A380 sales until the superjumbo's entry into commercial service, scheduled for the end of 2006.

Airbus said Tuesday its revenue rose 8.8 percent to 22.3 billion euros ($27 billion) in 2005, an all-time high. Operating margin — earnings before interest and taxes, or EBIT, as a share of revenue — rose to above 10 percent from about 9.5 percent in 2004, Humbert said. That implies a 15 percent increase in EBIT to over 2.2 billion euros ($2.7 billion). Full financial results are to be announced in March by Airbus parent European Aeronautic Defence and Space Co.

Last year's 378 Airbus deliveries beat the company's earlier record of 325 in 2001, and its gross orders beat the previous all-time record booked by Boeing and McDonnell Douglas in 1989, eight years before they merged. That year, the two airlines booked 1,106 gross orders, according to World Jet Inventory.

Airbus said its order backlog swelled to 2,177 aircraft, worth $220 billion (267 billion euros) at list prices, and predicted more than 400 deliveries in 2006. Humbert declined to give an order forecast but said it would be "difficult" to top 1,000 for a second straight year.

The 2005 order record beat a consensus forecast of 950, Kepler Equities analyst Pierre Boucheny said, but the jump in December may partly have reflected a rush to finalize deals that would otherwise have gone through in January.

"The more that they put into 2005, the less there will be in 2006, that's the risk," Boucheny said. But the operating margin guidance beat Boucheny's own 9.8 percent forecast, he said. "Everything is a bit better."

Now Airbus has to build all the planes it sold — a feat that will require production to be increased rapidly to unprecedented levels. The company plans to raise its monthly output of single-aisle jets to 32 early next year from the current 28.5 and is rallying 600 front-line suppliers to anticipate the surge.

"It is, for sure, a constant battle — it's not easy for the supply chain to ramp up like this," said CEO Humbert, pledging a "special focus on supply chain management" for 2006.

EADS shares closed unchanged at 31.45 euros ($38.15). BAE shares fell 0.3 percent in London to 417 pence (6.08). Shares in Boeing were 1.1 percent lower at $68.69 on the New York Stock Exchange.



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