Boeing's 787 (the 7E7 "Dreamliner") is a Game-Changing Product that Can't Meet Demand; Will Airbus be able to pick up the slack?

This past weekend Boeing unveiled its 787 family (symbolically on 7/8/07), but it isn't flight worthy quite yet, as Boeing plans to being flight testing in September and prove it ready for commercial use in just eight months (the shortest test-flight program in the company's 90-year history) and delivery of the first plane in May 2008. The 787 is Boeing first new jetliner since 1995 and, with 677 already on pre-order, its most successful ever. But with so many orders, new customers shouldn't expect Boeing to work through their backlog of planes until 2015, leaving a couple of years worth of gap for the Airbus A350, planned for introduction in 2013, to presumably pick up where Boeing might leave off.

Likewise, with demand booming, suppliers can't keep up either. A shortage of the specialized bolts that hold the airplane together (a high-priority goal to say the least) has tripped up Boeing's meticulous production planning with concerns about meeting the already higher-than-expected demand. It is believed it could take six months for the bolt suppliers to catch up, but Boeing believes they should have enough on hand to keep production moving, fully aware that, any announcement of a production delay could significantly hurt Boeing's now-lofty stock price.

While Boeing is facing a few minor setbacks, Airbus is continuing to face far harsher problems. First the design of A350 didn't meet expectations, which required a remodel that drastically set back the calendar. Then, just as Airbus was gaining credibility with customers, issues with getting jet engines from General Electric arose because GE has an exclusive agreement with Boeing for the 777, which directly competes with the largest version of the A350.

And even as the two companies battle over the skies, Boeing is going to be the first to market, delays or not. But Airbus doesn't seem too concerned that Boeing may have almost 700 sales before they even hit the market, with a confident stance despite their late start.

John Leahy, Airbus' chief operating officer and chief salesman, takes a decidedly different point of view. The A350 will benefit from entering service later than the 787, he says, giving designers time to enhance the overall design. Already, the fuselage diameter is five inches wider than the 787, which will make it more comfortable for passengers. And because the market for midsize, long-range jets is projected to be 3,005 airplanes over 20 years, Leahy professes to be unconcerned about the A350's late start: "If this were a market for 1,000 airplanes, I wouldn't have much of a market," Leahy says. "If I lose the first 600 orders to Boeing, so what? Over that 20-year period, I'll more than catch up."

The five or more years (depending on further delays) will be critical for Airbus to enhance its overall performance. While experts don't expect Airbus to fully catch up to the 787, the 777 is a different story. According to Scott Hamilton, an analyst at Leeham Co., an aerospace consulting firm, the the A350 blew the 777 orders out of the water at the air show recently in Paris. Because many don't expect A350 to catch-up to the 787, observers anticipate Airbus is putting all its weight behind ensuring the A350 picks up the 787 slack and overtakes the currently dominant 777 once and for all.

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