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European industry executives believe the proposed Airbus A350 long-range twinjet has already won its first marketing battle by slowing initial sales of Boeing's 7E7. The U.S. manufacturer fell short of its 200-by-year-end goal.

The A350 will require a 4-billion-investment-euro ($5.3-billion) ranked as affordable by Airbus and its owners, EADS and BAE Systems. Airbus executives stress that a newly revealed cost overrun for the A380 will not affect the launch of the nearly all-new A350. Last week, Airbus Chief Executive Noel Forgeard and EADS Co-CEO Rainer Hertrich both admitted that the mega-transport's development costs are exceeding predictions by as much as $1.9 billion but cited no specific causes. Initially, the A380's development budget was $10.7 billion, based on economic conditions in 2000, and has grown to more than $13 billion.

Airbus executives note that development costs are charged in real time. Over the last three years they have maintained that the A380 program's financial break-even point will be achieved with the 250th aircraft's delivery. Moreover, EADS, which owns 80% of Airbus, last week predicted that it will post in 2005 $2.86-billion earnings before interests and taxes on about $43 billion in revenues, an indication that the group's overall fiscal health is improving.

Financial analysts nevertheless believe funding for the A350 could sap cash flow in the next few years. "This is a significant investment but much less than what has been incurred for the A380, and will be spread over several years at a time when the A380's huge development costs are over," notes Nicolas Baudouin. He is Standard & Poor's Paris-based aerospace analyst. S&P, like Aviation Week & Space Technology, is a unit of The McGraw-Hill Companies.

Adds Baudouin: "S&P anticipates that, by 2010, EADS will have rebalanced its portfolio of activities, with a much-decreased dependence on Airbus and a significantly higher contribution from military businesses."

The 245-285-seat A350 is tentatively scheduled to proceed no later than mid-2005, make its maiden flight in 2009 and enter service in early 2010. EADS and BAE Systems, Airbus' parents, approved earlier this month the program's preparatory phase by authorizing commercial offers to potential customers.

Airbus executives claim that the A350, a significantly upgraded derivative of the in-production A330, will beat the 7E7 in terms of overall economics. For example, Airbus Vice President of Marketing Colin Stuart says the 245-seat A350-800's operating cash costs will be 7% lower than the 7E7-8's and its block fuel consumption/seats 2% lower. The 217-289-seat 7E7 was launched on Apr. 26, is slated to fly in 2006 and to enter service in 2008.

After initially claiming that the A330-200 would be a challenger to the 7E7, Airbus sales executives acknowledged that the aircraft's shorter maximum. range (6,650 naut. mi. versus 7E7's 8,500) was a serious competitive weakness.

Certification authorities in the U.S. and Europe, along with cockpit crews, will view the A350 as a derivative aircraft, using the A330's cockpit and flight systems, Airbus Chief Commercial Officer John Leahy says. Unrestricted cross-crew qualification will apply, based on a sole A330-A350 type rating. In terms of technology upgrades, however, it will be a nearly all-new commercial transport, adds Stuart, vice president of marketing.