Airbus Plans to Develop Rival to Boeing’s 7E7

Airbus plans to challenge Boeing Co.’s 7E7 airliner, the U.S. company’s first new plane in 15 years, with a longer-range version of the A330 model, according to people familiar with the project.

Airbus may announce a decision to go ahead with the plan by year-end, these people said. The aircraft would take advantage of new, fuel-efficient engines initially designed for Boeing’s plane by General Electric Co. and Rolls-Royce Group, and cost about $2 billion to develop.

The plane may help Airbus, based in Toulouse, France, defend its 80% share of the market for airliners with 250 seats, said Klaus Breil, a fund manager at Adig Investments. Chicago-based Boeing, which delivered fewer planes than Airbus last year for the first time, estimates that there will be demand for 3,000 planes the size of the 7E7 and A330 over 20 years.

“This would cut into the 7E7 business case,” Breil said. Adig has the equivalent of $6 billion under management, including 7 million shares of European Aeronautic, Defense & Space Co., Airbus’ parent. Breil is based in Frankfurt, Germany.

Airbus spokeswoman Barbara Kracht declined to comment on the plan, which was reported by the London-based Sunday Times newspaper.

In a telephone interview from Chicago, Randy Baseler, vice president of airliner marketing at Boeing, said about Airbus, “They finally figured out that the 7E7 is real, and they’re in trouble.”

General Electric spokesman Rick Kennedy said GE designed its 7E7 engine with the intention of selling it to others.

Martin Johnson, a Rolls-Royce spokesman, said, “As market leaders on the current A330, Rolls-Royce would clearly be interested in providing the latest generation of Trent series engines for any potential application.” About 40% of all A330s have Rolls-Royce engines, he said.

The Airbus planes challenging the 7E7 would look a lot like the current A330-200 and A330-300 models. They would be lighter because their wing boxes -- the central section that holds the wings together -- would be made from composites rather than aluminum.

Airbus has been discussing the new plane, which would be called the A350, with customers for several months and will proceed once there is an agreement with an airline to serve as the first major, or so-called launch, customer, the sources said.

Boeing signed a contract with Japanese airline All Nippon Airways Co. on July 28 for 50 of the 7E7s worth as much as $6 billion and has also announced commitments for 10 additional planes from three other airlines.

Boeing Senior Vice President Mike Bair said in June that the plane maker was talking to 30 airlines about orders for 600 7E7s. The 7E7 is expected to enter service in 2008.

The engine makers would share in the $2-billion development cost of the new Airbus plane, including the engines, the sources said. General Electric’s engine might be the first to go on the plane because it was developed for a dual application. The Rolls-Royce engine would require a new compressor, the sources said.

Airbus plans to put the new engines on both its A330-200 model, which seats 253 people, as well as the A330-300, which seats 353 passengers.

The 7E7 will seat 217 to 289 passengers and offer ranges as great as 8,000 nautical miles.

The Airbus A330-300 now has a range of 5,500 nautical miles, while the A330-200’s is 6,450 nautical miles. The ranges of both planes would increase through the new engines and by using more composites in their construction, which would cut their weights, extending the distances they can fly, the sources said.

“Airbus’ aircraft would be the more economical in the long run because it would give airlines better capacity so they can expand into growing markets,” said Breil of Adig.

David Calhoun, who as chief executive of GE Transportation oversees General Electric’s engine unit, said in an interview that the company intended to compete for an engine on the version of the A330 that would go up against the 7E7 if Airbus decided on it.

“If Airbus develops its plan for the plane, we’ll intend to compete, just because it makes sense,” Calhoun said at England’s Farnborough Air Show in July. Boeing “sort of set that stage when they decided to go with an open competition and multiple source. I think all of us designed our engine programs on that basis.”

Boeing decided in April to develop the 7E7, which was designed to use 20% less fuel than similar-size planes such as its 767, with most of the efficiency coming from new engines.