Here is the future of aviation: By 2015, air passenger traffic will double; by 2020, it will triple to nearly 4 billion passengers a year. Think of your last flight -- the lines, the chaos, the lost luggage -- then multiply the number of people in the airport by three.
Over the past four years, a cabal of airline executives from around the world has regularly convened in the French countryside to decide if they want to change this picture. To do so, they will have to take one of the costliest gambles in the history of civil aviation. The price tag may be as high as $12 billion, but the payoff could be global dominance of the airline industry for the next half-century.
At the center of this bet is a new plane from Airbus Industrie -- the innocuously named A3XX, which happens to be the biggest passenger-carrying bird ever put in the sky -- a plane that makes the Boeing B747-400, currently the largest airliner flying, look like a runt.
In today's commercial airline industry, there are but two major players still in the game: the American Boeing and Airbus, a consortium of Continental aviation companies that has come to symbolize the new Europe. Both envision different solutions to the coming passenger crunch. The outcome will affect everything from bicontinental unemployment to the amount of sleep that people who live near airports get between takeoffs.
Boeing says the best way to fly us from here to 2015 is to double the number of jetliners in service, raising the present number to about 25,000. Though this could certainly work, imagine an air-traffic controller at a major airport during a peak summer vacation week, staring down at a wave of winged metal on the radar screen. Boeing's official response: "Airline schedulers and airports will work together to squeeze in more flights." Let's hope it's right.
Airbus says Boeing is wrong. "It seems to us absolutely inconceivable," says Adam Brown, the company's vice president for forecasting, "that the system can work without substantial numbers of airplanes larger than anything flying today."
Which brings us to the A3XX. At this writing, the final decision whether to build the flying Godzilla -- a decision once considered speculative -- has leapt nearly every obstacle. It could be days away.
If the A3XX is as successful as Airbus hopes (which remains to be seen), it is likely that the planes will dominate the industry for the next five decades -- and possibly much longer. Since a typical airliner has a 20-year production run and continues to fly for 30 years, the economic impact could be devastating. American prestige would also be seriously tarnished. Since the end of World War II, airliners have replaced battleships as emblems of national power. According to one aviation executive who works with both companies, "There's a strong identity link between Boeing and the U.S. -- between Boeing's force and American force."
For the past three years, many considered the A3XX to be a pipe dream. Since 1997, Airbus has been waiting for 30 of what it calls "public manifestations of interest" to launch production. Until last Friday, the count was stuck at 21, all slated for Emirates Airlines and Singapore Airlines.
On June 2, Airbus trumpeted the news that Air France was "interested" in buying 10 more A3XXs, with a fanfare usually reserved for firm orders. On Wednesday, the International Lease Finance Corp., the biggest buyer of airliners in the world, said it might take five. On Thursday, Virgin Atlantic added five to 10 planes to the total. It isn't certain that these "manifestations" will turn into orders, but an engine has certainly begun to rev.
A3XX is what aviation engineers call "a very large commercial transport," or VLCT for short. If it were a movie, it might be called "The Jet That Ate the Sky." This is how big the airplane is: The A3XX-200, the largest model that Airbus is flogging to airlines, will seat 965 people and will be just 40 feet shorter than a regulation football field. One A3XX-200 could replace two B747-400s.
A plane this large presents a few unprecedented challenges.
The A3XX-200 will change the ground as well as the sky. Philippe Joppart, manager of technical safety issues for the Airports Council International in Brussels, Belgium, asked me worriedly: "What happens if the passenger-baggage matchup fails, and you have to get all the passengers out of the plane?" At best, your flight schedule is ruined, and you deal with an angry crowd the size of an infantry battalion.
There are other unresolved issues: maneuvering, parking space, refueling, loading, cleaning and so on. Barely a dozen airports in the world could now accommodate an A3XX.
Until the first A3XX is built -- and there is a lot of infighting among the members of the consortium over who will build which parts of it (and where) before its projected maiden flight in 2006 -- no one can even be sure if it will work as promised. (Airbus' key selling point: The A3XX isn't just bigger, it's cheaper to fly than anything Boeing can offer.) It will require innovations like "a next-generation engine, less expensive to run, more powerful and less polluting," says Robert Fourmental, a union shop steward and board member at France's Snecma engine works. "The engines we make now won't do it, and it's the same for everyone else in the business."
Still, the payoff could be gigantic. Airbus predicts that airlines will buy 1,300 planes the size of an A3XX at about $230 million each. Adding up to nearly $300 billion, the total represents one-fourth of all the money that will be spent on airliners between now and 2020, the biggest market niche in aviation history.
But suppose Airbus fails? Even top executives within the Airbus consortium -- which includes BAE Systems P.L.C. (formerly British Aerospace) and the merged companies Aerospatiale Matra of France, Germany's Dasa and Casa of Spain -- have sometimes wondered if they are making a historic blunder.
Last year Gustav Humbert, president of Dasa's commercial aircraft division, candidly told me in his Hamburg office: "The A3XX is a size and technology we never had before, and we're really trying to see if the risk is on a scale we can bear." In Paris, Jean-Frangois Bigay, managing director of the aeronautics group of Aerospatiale Matra, conceded that "we can allow ourselves a mistake, but not on that scale." They've since come around.
Doubting voices are rarely heard at the Airbus headquarters in Toulouse, France. It looks a lot like a luxury resort with airstrips where the tennis courts should be. Here, Airbus employees talk about the A3XX's future in ecstatic tones. It's a little like listening to medieval barons mapping out the Albigensian Crusade, a take-no-prisoners war on heresy that ravaged the region around Toulouse eight centuries ago. The A3XX is Airbus' battering ram, and once again the Europeans are storming the gates of the infidel. According to Philippe Jarry, V.P. in charge of the A3XX project, "When you have a certain stature, at a certain point you start to have duties." Likewise, Airbus' Brown talks of a "theological difference" between Airbus and Boeing. He means it, too.
When Airbus was created 31 years ago, few would have predicted it would still be around today. "What amazes me most is that Airbus exists," comments French scholar Pierre Muller, author of "Airbus: The European Ambition." "In 1969, the chances it wouldn't survive were much stronger than the chances it would." Says Brown, a grinning iconoclast whose office walls are lined with arcane aviation studies: "Predicting the future is a great job because nobody knows if you're right for 20 years."
Airbus staffers refer to the company's founders -- Frenchmen Roger Biteille and Henri Ziegler and German engineer Felix Kracht -- as "The Fathers," in capital letters. Dasa's Humbert calls them "pioneers," the kind of people who didn't panic when the Elbe River flooded the hangars in Hamburg two days before Airbus made its first deliveries to Lufthansa. Says Jarry, who grew up cutting clips on Airbus out of aviation magazines, "They had vision. If you want to succeed in aviation, you need vi-si-on."
What Brown remembers from the early years are crazed adventures. He flew the company's very first airplane, an A300 jetliner, to America on a barnstorming trip in 1973. "If anything went wrong," he says, "the company was dead." Nothing went wrong that couldn't be fixed, but that didn't stop American airmen from treating him and his colleagues like jerks. Brown hasn't forgotten that, either.
At the time, American mothers (including mine) still told their kids, "Eat your vegetables -- children in Europe are starving." In the American mind, Europe was a bunch of cute little countries that couldn't defend themselves without NATO, let alone make airliners. The same American airline executives who ripped down the street in BMWs told Brown they could never trust a European airplane.
At 1977's Farnborough air show, Brown took a cruel hit from Boeing on his English home ground. There he was at the Airbus stand when Boeing's Jake Steiner -- "a great father figure," Brown says, "the father of the B727" -- showed up to check out the new boys. "He said how delighted everyone at Boeing was that Airbus was there," Brown adds, "because the business was very cyclical, and it would be wonderful to have Airbus to provide additional capacity at the peaks." Brown recalls the story with some irony. "That's an extremely patronizing attitude," he says. Soon afterward, a cryptic little sign graced the front entry of Airbus headquarters. It said: "BB." Not for Brigitte Bardot, for "Beat Boeing." The crusade was on.
Its first great battle began when Airbus' A320 was launched in 1983. It had 150 seats, about the same as a B737. The A320 was also much more modern in its flight controls, roomier for passengers and cheaper to fly. Brown predicted Airbus would sell 600 of the planes, far more than the combined numbers of its first two airliners. "I seriously underestimated the reality," he says.
Through sheer Yankee arrogance, Boeing actually helped. While the A320 was in development, the American firm had ample time and resources to launch a new plane for the same short-haul niche. Jarry shudders to think how close Boeing came: "Wonder of wonders, Boeing arrives at the Le Bourget air show in 1984 with a model of their new revolutionary midrange plane. And people said, 'If the A320 has that in front of it, good luck.' It was scary." But instead of building a new plane, Boeing merely retouched its bestselling B737.
"One of the reasons we've got to where we are," allows Brown, "is because people didn't take us seriously." Boeing repeatedly declined to comment on these issues.
Remember how Detroit sneered when Japan Inc. started shipping gas-stingy little cars to the U.S. in the 1970s? Boeing had made the same mistake, with the same results. After the oil shocks of the mid-'70s jacked up the price of jet fuel, and deregulation split air routes into hubs and spokes, Airbus' little airplane that could became a hot item. Airbus quickly spun off three mama-papa-baby-bear-sized variations of the A320, of which it has sold a stunning 2,387 to date. In the 1990s, it built on that foothold with the A330 and A340 -- long-haul planes that cut deep into the middle of Boeing's market. Boeing belatedly replied with new airliners and a price war that left both companies gasping, but Airbus stayed in the game.
And like Lee Iacocca of Chrysler, who asked Washington to hammer Tokyo on his industry's behalf in the 1970s, Ron Woodard, former president of the Boeing commercial airplane group, went around Brussels in the late 1990s complaining that Airbus "is still trying to get state aid to launch new products." Though Airbus does indeed get government loans, they are repaid only when the planes sell. Boeing has received governmental help itself. The company developed the B747 as a troop carrier on a defense grant, and got a reported $1.6 billion from NASA in the 1990s to work on a supersonic transport.
Airbus asserts that the real reason for its success is a humanistic view of labor relations. Unlike strike-wracked Boeing, it avoided downsizing skilled workers throughout the 1990s. "It's a basic difference," says Airbus spokeswoman Barbara Kracht. But that isn't quite true.
Airbus doesn't actually build planes -- the consortium's member companies do that -- so it has few workers to lay off in the first place. Meanwhile, as price wars of the past decade heated up, its partners were decimated. In France, more than 21,000 of the 119,000 people in the aviation industry lost their jobs in 1991-94. At Dasa in Germany, a hiring freeze turned into a program called Dolores -- "like 'pain' in Spanish," says corporate spokesman Rainer Ohler. Two-fifths of the company's managers and workers vanished.
What Airbus really did was to give European aviation a choice: Toughen up or die. "Airbus put us under intense pressure," says an executive whose European company supplies both Airbus and Boeing. "They wanted more than the Americans, and they still do. They demanded cost cuts that went from 10 to 40 percent from their suppliers -- even 80 percent." He adds: "It nearly killed us, but it made us stronger. Everyone who works with Airbus is proud of it, because the result is continual improvement."
Boeing has just one remaining asset Airbus can't top -- the B747, the humpbacked jumbo jet that inaugurated the era of mass air travel in 1969; it remains the most profitable airliner the industry has ever seen. "In the 1990s, the B747-400 sold at $160 million. One-third of that was profit, and the production rate at one point was up to six a month," notes aerospace analyst Nick Cunningham of Salomon Smith Barney in London. When was the last time any company in your stock portfolio made $300 million in profit per month on just one product?
Those days are over. So far this year, Boeing has sold only six B747s. But Airbus appears unwilling to wait for the jumbo to die a natural death. It wants to kill it itself. Its goal for the A3XX, says Cunningham, is "to do the final project -- to cap Boeing so Boeing never again owns the high ground, as they did with the B747."
Ironically, Airbus doesn't really need the A3XX to beat Boeing because it already has. Since 1999 Europeans have sold more airliners than Americans. It has taken a while for this fact to sink in. Last year as I sat in Brown's office, he swore that without the A3XX, Airbus would never "kill Boeing's cash cow, this monopolistic B747 that throws off so much cash that they can use it to start other programs and subsidize other airplanes." Nor, he added, could Airbus ever take half the airliner market from the Americans. Then he paused, and said amazedly: "Both those objectives have been achieved. Talk about an ingrained underdog mentality."
Now, as the A3XX launch countdown accelerates, companies and cities across the European Union are fighting bare-knuckled for their cut of A3XX contracts. On the banks of the Elbe, civic boosters have erected mockups of cargo crates labeled "A3XX." Inside assembly plants in Toulouse and Hamburg, visitors are shown green-primed Airbus fuselages like hollowed-out Sequoias, their cabins lined with jungle weaves of cables, tubes and insulation. The message is that no one could build an A3XX better than the fine folks on this very (French or German) factory floor.
Meanwhile, with every day that goes by, the A3XX gets more expensive to build. One reason, says Jarry, is that airlines want no less than six versions of the plane, each offering variations in passenger capacity, freight load or range. "The Japanese, for example," he says, "want a short-range plane. The first, second and fourth air routes in the world are Japanese short-range routes." Airbus figures that just 20 airlines will buy 75 percent of all the A3XXs ever sold, so it makes sense to build them to order. But given the chance -- and the launch of a new airliner is the best they'll ever get -- airlines always demand the maximum number of options on their planes. According to former United Airlines CEO Gerald Greenwald, that makes airliners 20 percent more expensive to build than they should be. For an A3XX, the difference amounts to more than $45 million per airplane.
Numbers like that are scaring the bureaucrats who lend Airbus its development funds. When I told Jarry that the wonks at the Ministry of Finances on the Quai de Bercy in Paris, known to the French as "Bercy," calculate that the world market for the A3XX will be no more than 450 planes, he got angry. "What's the good of having computers if you don't have common sense?" he snapped. "I think our planes are going to sell by the thousands. Tell that to Bercy." Airbus is built on faith, and so far its faith has worked miracles.
As for Boeing, it's finally taking Airbus and the A3XX more seriously. Last year Boeing spokeswoman Susan Davis told me flatly, "There is no market for a plane larger than the B747-400." If so, then her president, Phil Condit, has stopped reading his own company's marketing studies. He has begun pushing Airbus' customers to buy the future B747-X, a remodeled, bigger version of Old Jumbo.
No one knows for sure what will happen in commercial aviation between now and 2020. But one thing is certain: The skies are about to become a lot less friendly.