Airbus Chief Confirms New A318; Offers Vision By Ron Wilbur FARNBOROUGH, England – Airbus CEO Noel Forgeard brought his vision for Airbus to the Farnborough Air show today. In contrast to previous shows featuring his usually combative predecessor, Jean Pierson, the confident Forgeard seemed almost serene. One of the more interesting aspects of his one hour almost friendly chat with the press was when Forgeard revealed that Airbus Industrie's advisory board is ready to launch a new aircraft based on a shortened version of the A319, with a go ahead decision at the end of 1998. In a press conference tomorrow, John Leahy, Airbus Senior Vice President of Commercial, will describe the new Airbus A318, the much anticipated answer to Boeing's 100-seat 717-200. The actual launch decision, however, is subject to establishment of an adequate customer base in terms of price and volume. Take that as a qualified "maybe." The CEO did admit that the consortium has board authorization to offer the aircraft to airlines. The new aircraft would be ready for service entry in the year 2002 and would be powered by new-generation PW6000 engines. CFM International had previously determined that they would not compete for the business if Airbus selected the PW6000, stating there isn't sufficient market for two engines. An earlier program to develop an all-new 100-seat aircraft in cooperation with partners in Italy, China and Singapore fell apart earlier. "We studied exhaustively an all-new 100-seat jet -- the A31X -- but have unanimously reached the conclusion that such a program was not financially viable," Mr. Forgeard said. "However, we were impressed by the skills and business sense of our Chinese partners, and do intend to cooperate closely with China to help it further improve its aircraft manufacturing technology," the Airbus CEO added. "To that effect, we have defined a new -- still confidential -- project on which we already are working with them." The program, on which the two partners are already working, involves Chinese manufacture of components or sub-assemblies for existing Airbus models. During the briefing, Forgeard recounted Airbus' accomplishments, including total orders to-date of almost 3,000 aircraft, with 322 aircraft on order so far in 1998 worth a total of $21 billion. In the last two years Airbus has booked orders for 815 aircraft, equal to the first 16 years of the 28 year old consortium's history. Forgeard reminded the press that the European aerospace manufacturer reached 50% market share for orders in the first half of 1998, while expressing confidence that this level of accomplishment can be maintained. To do this, the consortium needs to strengthen the product family, said Forgeard. Pointing out the successful launch of the A340-500/600, the Airbus chief said the "large aircraft monopoly enjoyed by Boeing is being nibbled at" by Airbus. Nibbling was not enough, however, as Airbus continues work on the A3XX, the giant aircraft destined to become the manufacturer's new flagship when it enters service in 2004. The case for the A3XX is obvious, according to Forgeard. Air traffic is growing by 5% per year, and is expected to grow by 3 times in five years. Also, the environmental issues such as slots availability require larger aircraft. In a development program of this type, the consortium is looking beyond cyclical downturns such as the current Asian crisis. "If there is no market for aircraft larger than are currently flying, why would 20 of the world's largest airlines assign senior executives to help us define the A3XX?" Over the next two decades Airbus has forecast a worldwide demand for 1,300 aircraft larger than any currently flying, worth $300 billion, representing roughly 25% of total revenues for aircraft manufacturers. "This is the most important program we've ever considered," according to Forgeard. Still, the consortium is looking into the business case to determine if there's reason to justify a launch. Boeing, of course, has defended their decision to stop further development on a SuperJumbo, stating that the market is too small to justify the expense. Airbus believes it can develop an all-new A3XX for $10 billion, a figure that Boeing suggests is too low. Airbus has already lined up 35% of the development costs through risk-sharing partners. Responding to questions about the effect of the Asian economy on the SuperJumbo's development, Forgeard said that "a one, two or even four year crisis will have no impact on a program to develop a plane with a 20-30 year life. Pointing to Boeing's 747 family, Forgeard said that aircraft will likely continue for 50 years. Forgeard's slant on it - "it's best to invest against the cycle." Forgeard's vision for the aerospace manufacturer focused on three issues. Bowing to the Airbus future as a single corporate entity, the chief executive said the consortium will no longer sacrifice profits for market share. To that end, Airbus is announcing at Farnborough a three percent across the board increase in prices. The new goals, said Forgeard, are related to meeting customer value and establishing shareholder value. The consortium's strategy for preserving margins is to provide technologically superior aircraft and respect delivery schedules. Taking a dig at the employment philosophy of its American rival, Forgeard said the reason it is able to build aircraft on schedule is because is not indulged in the layoff, hire cycle and so has a stable, motivated work force. Turning to the future, the four partners will soon contribute their assets to the new Airbus Industrie. Employees will grow from 3,000 to 35,000. Airbus will become a single focus company. Productivity will become an important focus for the new future. Between 1992 and 1997, Airbus partners doubled productivity per employee. At the same time, production times per plane were cut. Forgeard insists that further efficiencies are possible. Acknowledging the inevitable, Forgeard said that the market will certainly make a downturn, but "no one knows when." To meet this inevitability, Airbus will have to be more lean, he said, echoing the persistent battle cry of aerospace companies around the world. Until then, the Asian crisis has had little effect on the European manufacturer, according to Forgeard, with no cancellations of widebodies and only 12 cancellations of narrowbodies. Deliveries of an additional 15 aircraft have been deferred for up to two years. The single-aisle aircraft are easily remarketed, according to the chief, helping Airbus emerge relatively unscathed. Turning to the issue of the conversion of Airbus into a single corporate entity, Forgeard said the integration of the company will be pushed back until mid-1999. Forgeard explained that the partners need time to build a structure that will last. What's most sticky is the valuation of the assets, he continued, a process that must accommodate five parts - the four partners and the assets of Airbus itself.