Airbus A3XX---vapor plane?

From:         rna@gsb-birr.Stanford.EDU (Robert Ashcroft)
Organization: Graduate School of Business, Stanford University
Date:         27 Feb 96 23:00:25 
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There have been recent newsreports about Airbus trying to launch a
competitor to the 747 at a cost of up to some $14 billion (figure
from a French govt minister, reported in Feb 12 issue of AvWeek).

Stated reason is that Airbus is getting beaten in megadeals because
Boeing has a 747 and Airbus doesn't.

Weird thing about this, however, is that the recent megadeals have
little to do with the 747, but are rather centered on the 777, for
which Airbus has two competitors in the A330/A340.

There's no question that Boeing makes a lot of its money from the 747,
but that doesn't change the fact that the recent megadeals have little
to do with the 747.  Pointing at the 747 as the reason for Airbus's
recent troubles is disingenuous at best---the real problem is that the
777 is giving the A330/340 a tough time.

The advantage of a A3XX program with associated subsidies ("launch aid"),
is that it would allow Airbus to avoid dealing with the recent weakness
of the A330/40 program, and also lessen the competitive pressures of
Boeing and Douglas's race to reduce costs, something that Airbus cannot
easily immitate.  Boeing estimates the cost of a 747-500/600 program
at $2 billion, which would allow them to offer the new models at low,
low prices if they needed to, while recouping the cost of a new wing
that could then be used for other models.  I sincerely doubt that Airbus
can justify the A3XX program on economic grounds.  It would no doubt
hurt Boeing, but as for paying its own way, the existence of a cheap
alternative would make it very difficult to cover development costs.

It's also hard to justify even from a industrial policy viewpoint.
Even if you accept that Europe "must" have the capability to build
transport aircraft, that's been achieved with the A330/340 program.
To date there's only one military application of the 747, which is
as Air Force 1 and the airborne command posts.  $14 billion is a lot
of money to spend on an even bigger airplane for Jacques Chirac to fly.

(Aside: where would Airbus build such a thing?  Could it fit in the
Toulouse facility?  If this thing goes forward, watch for one hell of
a fight over the issue of who gets final assembly of Europe's largest
plane.  Think the French (already insecure about German power) could
stand to see the Germans do it, or might the Brits claim that it was
their turn to do a final assembly?  Oh, the political problems that this
would cause would be classic, since the final assembly site would then
be thought of as "the" Airbus site.  And a lot more stuff would have to
be built on site.  How do you transport gigantic wings from England,
anyway?  I wouldn't be surprised that any such site might straddle
the France-Germany border, giving them both boasting rights).

The problem, of course, it that it's unclear whether even the EU govts
can afford the costs of the A3XX program, given their fiscal problems.
Hence, presumably, the frantic search for other outfits willing to
invest capital in the project (Russians, Chinese, you name it).

Airbus's own figure of $8 billion suggests that the obvious strategy
of low-balling the program costs (taking lessons from NASA, I guess).
Once you've spent $8 billion, of course, who would cavil at spending
another $6 billion to finish the program?