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Airbusted

October 12, 2006

WHEN AIRBUS ANNOUNCED IN 2000 that it would build the world's largest passenger jet, just about everyone agreed that the effect of the 555-seat A380 would be felt around the world. Everyone was right -- but for the wrong reasons.

The A380 isn't yet transforming international travel, shuttling record numbers of passengers between Los Angeles and Australia. Except for a few test planes, not a single A380 has taxied to the gate of one of the gleaming international terminals designed specifically to handle it. Instead, the A380 is serving as a cautionary tale about how government subsidies can harm international competitiveness. Airbus' parent company, EADS, seems loath to fix its problems, probably for fear of offending the governments that subsidized the A380 program with more than $3 billion in low-interest loans.

Originally slated to have been flying passengers across oceans by now, problems with installing the A380's 300-plus miles of wiring have delayed the plane's first deliveries by almost two years. As a result, Airbus will lose more than $6 billion in profit over the next four years. In July, EADS fired Airbus' chief executive and installed Christian Streiff, who immediately launched an audit of the troubled A380 program. Streiff determined that the issue wasn't just wiring but that a single A380 undergoes final assembly in two cities -- Hamburg, Germany, and Toulouse, France. Streiff wanted only one such factory, which would have required laying off large numbers of either German or French workers, whose governments have given Airbus billions in subsidies. EADS rebuffed Streiff's plan to streamline the A380's production and, sadly for Airbus, he resigned Monday.

While Airbus has been preoccupied with the A380, Boeing has developed the midsized, fuel-efficient, long-range 787 Dreamliner, which should enter service in 2008. Boeing has sold nearly 400 Dreamliners since 2004; Airbus, by contrast, has yet to start building its revamped A350, a badly needed competitor to the 787.

None of this is to say that the A380 is a bad airplane. It could turn out in coming decades to be a resounding success. Yet Airbus and EADS need to take more drastic action to get the A380 program on track. They could start by weaning themselves from government subsidies. Then they would be better able to resist the political influence that makes it so difficult for them to build the A380 quickly and efficiently.

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