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. Last Updated: 07/27/2016

Boeing Hot on Heels of Airbus

LONDON -- Boeing is turning up the heat on European archrival Airbus as its new 787 model helps revamp an image that just a year ago was marked by ageing planes and receding market share.

The new fuel-efficient design has sparked a flood of orders from airlines being squeezed by high fuel prices and falling fares and put Boeing on track to win more orders than Airbus for the first time since 2000.

It has also put Airbus under pressure as its mooted A350, designed as a response, draws scant attention.

To help block such a response, Boeing has also persuaded the U.S. Trade Representative to fight to stop European governments from lending Airbus money to design planes.

"Boeing turned and fought. They weren't supposed to do that," said analyst Richard Aboulafia at Virginia-based consultancy Teal Group.

Airbus topped Boeing in deliveries in 2003 and 2004, sparking talk of regime change.

While the France-based company boldly developed the mammoth A380 -- due to fly for the first time this month -- Boeing seemed unwilling or unable to counter the onslaught.

The U.S. planemaker had not launched an all-new plane since 1990 and seemed unable to move new models, such as the rakish Sonic Cruiser, beyond the drawing board.

Airbus began to refer to Boeing's "paper airplanes" while some planes Boeing did produce were growing stale, with as many as four of its six models seen at risk of termination.

Yet with everything going Airbus's way, the market in the last 12 months has suddenly turned, with Boeing on the rebound powered by the 787.

Top Airbus salesman John Leahy in a recent U.S. newspaper interview called Airbus the underdog, though he remained undaunted regarding the A350.

"I will have 100 A350 orders by the end of the year. ... If I don't, I'll look pretty silly," he told the Chicago Tribune. "I think we can pull it off. The underdog always has an advantage."

Yet a recent deal for up to 20 planes from Korean Air took Boeing above 200 orders or commitments from 17 customers for the 787 in a contest some analysts expected Airbus to win.

It left Airbus's mooted A350 -- a long-range, updated version of its A330 -- with just one would-be customer since it was announced last December.

"Clearly before we continue to undertake launch, a certain number of customers and airlines are needed," said a spokesman for Airbus, but he declined to say how many.

Analysts say Airbus may have to rethink the design, which could push back its proposed 2010 launch.

"Boeing is really gaining momentum," said one London-based analyst. "The 787 is working and the A350 is not."

Boeing has made other changes as well, killing off its aging 717 and 757, re-examining the idea of a new, bigger 747 jumbo and preparing to deliver a version of the 777 early next year with the longest range of any airliner.

Boeing and Airbus, despite different overall market forecasts, agree that there is a lucrative niche for twin-engine planes of about 220 to 300 seats, where the 787 and A350 are aimed.

Analysts said what Airbus did with the A350 took on further significance because of the collapse of a 1992 trade pact last year under which Airbus could tap European state loans to help fund new models.

The U.S. Trade Representative has threatened to pursue litigation at the World Trade Organization if Airbus seeks such loans for the A350, while Airbus Chief Executive Noel Forgeard has stated his intention to do so.

Forgeard has said Airbus might ask for 1 billion euros in state loans for the A350, in line with projected costs of 4 billion euros ($5.2 billion).

But analysts said the cost of the program could soar if the planemaker is forced to develop an all-new design instead of simply upgrading the A330.

"The current A350 might not do the trick," said Aboulafia, noting all-new designs take longer and cost far more; the A380 has cost about $12 billion.

The Airbus A380, set to be the star of next June's biannual Paris air show, is expected to begin deliveries in 2006, meaning the planemaker will still be recovering its costs while it tools up for the A350.

Forgeard has said the A350 will win 50 orders by the Paris show, a target which analysts said could be at risk.

In advance of the event, analysts say pending orders from Northwest Airlines and Qatar Airways will be crucial for the A350 as both carriers are major A330 customers, so a Boeing win would be a blow.