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Moderator:
Good morning, everyone. Today our guest is Allan McArtor, Chairman of Airbus North America. Let's get started!
Allan McArtor: I'm delighted to join you from the Farnborough Air Show. Air Shows are an exciting time for industry professionals to get together and to make announcements of major sales. Airbus is making such announcements at this air show.
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Towson, Md.:
What airlines have purchased the A380 so far?
Allan McArtor: There are 12 customers so far with a total of 133 A380 orders. That includes today's announcements of Etihad with four aircrafts and launch customers include Lufthansa, FedEx, Virgin, Qatar, ILSC, Emirates, Malaysia, Qantas, Korean, Air France, and Singapore.
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Washington, D.C.:
What companies in the U.S. are providing parts for the A380?
Allan McArtor: There are hundreds of suppliers in the U.S., from small companies such as HITCO near Los Angeles to major aerospace companies such as Goodrich, Honeywell, Rockwell, GKN, GE, Pratt and Whitney.
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New York, N.Y.:
What are some of the key parts of the A380 that are coming from America?
Allan McArtor: Landing gear, hydraulic wing panels, composite structure, avionics, wing spirs, etc.
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Frederick, Maryland:
Is Airbus an American or French owned company?
Allan McArtor: Neither. It is publicly owned by EADS 80% and 20% EAE Systems. These shareholders are publicly traded companies.
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Annandale, Va.:
Good morning Mr. McArtor. Are there any airline companies in the US that have purchased the A340-600?
Allan McArtor: Not yet, but we are in active discussions with U.S. airlines.
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Falls Church, Va.:
Being a former Administrator, do you have any opinion on the major re-organization at the FAA?
Allan McArtor: The FAA plays an extraordinarly important role in the regulation and safety of our airline industry. The organization must change and grow as our industry changes and grows. The reorganization is an example of the FAA modernizing itself to meet current demands.
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Washington, D.C.:
Legroom and fresh air. What are the trends in those two areas? I find less and less of both all the time. Is this something Airbus has any role in -- or all the seating configurations and air controls all up to the airlines?
Allan McArtor: The design of seating configurations is done by the airline. Cabin air is part of the aircraft system. Advances in this area have been significant in the last several years. Airbus has designed state-of-the-art air conditioning systems in its new aircraft.
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Arlington, Va:
I find Airbus equipment more reliable and comfortable than Boeing's equipment. How do they expect to compete? Keep up the good work. Airbus is definitely the best in the air at this point. Can't wait for your new big aircraft in the sky. When do they come?
Allan McArtor: Thanks, Mom!
Boeing makes good airplanes (I agree with your preference for Airbus aircraft however—I think our planes are, plane-for-plane, more comfortable and innovative). With respect to how Boeing will compete with Airbus, it will be through increased research and development that results in new aircraft. The new aircraft that Airbus has been developing, manufacturing and putting into service has resulted now in our competition finally developing their first new aircraft in well over 10 years. So, it just goes to show that the competition from Airbus is good for the overall market, since our aircraft drive the competition to improve it’s product line also.
Regarding the A380, it will fly for the first time next year and will enter passenger service in 2006. The freighter version, for which we have orders from Fed Ex among others, will enter service in 2008.
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New York, N.Y.:
Hello. I'm wondering, are you ahead of schedule on delivery? When will your first delivery take place? Are you below or over budget?
Thank you.
Allan McArtor: Airbus is on schedule with its A380 program. It will first fly first quarter of 2005. It will take one year to certify. The first delivery is second quarter of 2006 to Singapore, and I am pleased to say we are right on budget.
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Auburn, Wash.:
What percentage of Airbus parts/products are produced in the USA?
Allan McArtor: Airbus spends approximately 40% of its total procurement budget in the U.S. Fifty percent of the A380 is procured in the U.S. At over 5 billion dollars per year, Airbus is the largest export customer of commercial U.S. aerospace.
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Sanibel, Fla.:
Why do you think the Pentagon is so reluctant to buy European aircraft when the U.S. government peddles its aviation products so readily and forcefully there? The new tankers and the presidential helicopter replacement are classic examples.
Allan McArtor: The global marketplace will require global procurement and the purchase of global products to keep a healthy balance of trade and a strong joint military capability. Be patient, this balance will occur.
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Pittsburgh, Pa.:
What impact, if any, will the growing popularity of low-cost carriers have on demand for new Airbus products?
Allan McArtor: We are seeing that the traditional model of starting a low-cost carrier with old and cheap aircraft (which is what Valujet, the predecessor to Airtran, did in the 1990s) is no longer applicable. The new model is for low-cost airlines to get financing and then buy new, efficient aircraft—for example, Jetblue, Independence Air, Virgin America, etc. And, not coincidentally, those airlines and several others have all made the decision to go with the Airbus A320 family of aircraft. While Boeing makes a good product—I’m not going to knock it—the A320 family provides a more passenger-friendly environment, and these low-cost start-ups realize that their customers want a good travel experience in addition to low fares.
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Washington, D.C.:
You said Airbus is owned by shareholders, but aren't some of those shareholders governments?
Allan McArtor: Correct. A minority of publicly traded shares are held by some government treasuries. These investments, however, do not control nor attempt to influence corporate policy of the shareholders.
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Washington, D.C.:
Just curious, will Airbus sell the A380 to any U.S. airlines? When will the aircraft come to the U.S.?
Allan McArtor: Federal Express has already purchased ten A380 freighters. Singapore and Quantas will begin US service in 2006. The economics of the A380 are so compelling that virtually all international carriers will want to fly it on long hub-to-hub routes, including US carriers.
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Plano, Tex.:
The A380 looks to be a real shot in the arm for the aerospace industry, both for carriers and the supply base. What are the latest projections regarding the economic impact this aircraft will have on the industry in terms of jobs, revenues and costs? Additionally, given your role in North America, what is Airbus' current economic projections for the A380 in North America?
Allan McArtor: The aircraft truly is a shot in the arm for the industry. Airlines are buying the plane because they can make more money with it. Often, there are two 747s or other wide-body aircraft departing in a city-pair within an hour of each other. Now, that demand can be satisfied with one A380. [And by the way, that means a big reduction in costs for the operating airline – one crew not two, 4 engines not 8, etc.]
In manufacturing, it’s driving innovation, not only at Airbus and at our competitor, but also at the companies in America and around the world that manufacture components for the aircraft. With respect to the economic impact, the A380 will have as much as 50% of its content coming from U.S. suppliers and manufacturers. While I have not initiated a specific U.S. economic impact study for the A380, it’s a multi-million-per-airplane project with a lot of American content; so, the benefits to U.S. companies supplying the project will be tremendous.
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Washington, D.C.:
Why did Airbus decide to build an enormous plane at a time when most airlines are downsizing/cutting flights/cutting costs? Will this plane cost less to fly than a previous incarnation of a smaller plane?
Allan McArtor: The future market in air transportation shows that international hub-to-hub traffic will double in 15 years and triple in 20 years. This demand can only be served more efficiently by using airport and air traffic control resources. The solution, then, is obvious: a bigger, more efficient, quieter, and more environmentally friendly aircraft is required. Airbus is developing the A380 because our customers required it.
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The University of Texas at Austin, Tex.:
How much total cost of North American Parts as an approximate percentage of the new aircraft would you estimate?
As Airbus is a direct competitor to Boeing Commercial Aircraft do you anticipate increased or diminished future American components contracts to Airbus?
Would a US goverment shift to providing insured bond type subsidies to Boeing similar to the European system be seen as threatening or unfair move?
Thank you for your time.
Allan McArtor: Answer: It depends a lot on the engine choice customers make for their ordered A380s, plus choices the customers make for certain other equipment (like cabin interiors and the like). If the customer chooses the Engine Alliance engine (made as a joint venture between GE Aircraft Engines and UTC’s Pratt & Whitney), then the U.S. content is about 50% of the value of the A380. A Rolls-Royce engine choice pushes that percentage of U.S. content value down by a bit more than 10% (my estimate), but the value of American-manufactured components on any A380 is very, very high.
In addition to the pure value of the U.S. parts and technologies on each A380 aircraft, I think it’s really important to remember that the aircraft project that is important to continued innovation and development in American aerospace. For one thing, an aircraft the size of the A380 has to take weight savings and the latest innovations in fuel-efficiency and reducing environmental impact into consideration. So, our American suppliers are having to become more and more innovative in finding solutions to these challenges. Of course, the solutions they develop for the A380 (Eaton Aerospace’s 5000 p.s.i. hydraulic system for the aircraft, for example) make these companies more competitive in the world for a whole range of applications beyond the A380. So, we’re helping drive innovation. In addition, obviously, a great new aircraft like the A380 drives our competition (and ourselves) to innovate more for other airplanes and it increases competition. As a believer in the power of the market, I always think competition is a good thing.
On the bond-type issue... It is currently an option for the U.S. under the 1992 bilateral agreement. However, Boeing has preferred to benefit from indirect subsidies (defense contracts, etc.) that do not reauire Boeing to repay. These are OK under the 1992 agreement too, by the way.
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Hong Kong, China:
Can the Airbus 340-500's range match that of the Boeing 777-200LR?
YK Leung
Allan McArtor: The A340-500 is the longest range aircraft in the world. Singapore Airlines, for instance, set a record earlier this summer with an 18+ hour nonstop flight from Singapore to Newark – a trip of about 9,000 nautical miles. While that’s a very long flight, I understand it saves travelers four or five huors (vs. making a connection), and the airline has configured the interior to be more spacious (i.e., fewer seats – 181 overall). This allows passengers to move about more easily during the trip. They also have included some lounge space for passengers. I haven’t traveled the route, but I understand from some who have that it’s a very pleasant experience. Also, having four engines will reduce the chance of having to divert in the event of an engine shutdown. So, I think it will be more reliable.
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Pittsburgh, Pa.:
Early indications are that the A380 is overweight and that several major airports say they can't be ready to handle the aircraft in time. Combined with delays in the aircraft's order from Virgin are you still confident this aircraft will break even financially?
Allan McArtor: I am pleased to say that the A380 is within 1.5% of its weight specifications and less than .2% of the computer-aided design forecast. All new airplane programs work to reduce weight during the early phases. The A380 is on schedule in this regard, and we are confident all performance targets will be met. With respect to airports, any airport that is capable of handling the B747 or B777 can accept the A380.
The A380 takes less runway to take off and land than the B747. It also has a softer footprint due to its twenty main landing gear. The Virgin delay is due primarily to the very sophisticated specifications Virgin has with its interiors and inflight entertainment systems. Airbus is not only confident that it will break even, but the A380 is destined to be the flagship of international carriers for the next century.
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Fairfax, Va.:
Despite all of the buzz surrounding the Boeing 7E7 and Airbus A380, narrowbody aircraft remain the big sellers in commercial aviation in terms of pure numbers of aircraft. Considering that the Airbus A320 and Boeing 737 are both designs at least two decades old, when do you think we'll see new narrow-body designs from Airbus and Boeing. Also, how do you view the growth in size of the jets offered by Bombardier and Embraer?
Allan McArtor: The A320 family has undergone continued upgrade and evolution since its introduction. In addition, the advantage that it has over the larger jets offered by the commuter jet manufacturers is that the A318 (for instance… a 100- 114 passenger aircraft) is part of a family of aircraft. Airlines gain a lot of cost advantage by operating a family of aircraft (in terms of crew/staffing, spares, maintenance, etc.). Airlines that buy the larger commuter jets tend to be buying a single-mission aircraft as part of a “one-off” proposition. So, we don’t think these jets are a threat to our customer base.
As far as a new design for the A320-type market, we will continue to offer incremental improvements. I don’t see a complete redesign being necessary anytime soon.
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Minneapolis, Minn.:
Will air traffic control ever be done in metric terms (i.e., kilometers rather than feet and miles)? Is there any advantage or disadvantage to either system? I wonder if citizens from countries with the metric system have trouble with this.
Allan McArtor: At some point, the world will standardize its measurement systems including aviation. However, up until now, the difference has not caused any significant safety problems.
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New York, N.Y.:
How much of an issue do you think that protectionism is in the aircraft industry?
Allan McArtor: Generally speaking, I don’t think it’s much of an issue right now. As I’ve already referenced, I hope that our elected and appointed officials help keep it that way. "Buy America" advocates could inadvertently create a "Bury America" result.
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Northfield, MN:
After years of watching the airliner industry "get small"--toward more regional jets and so forth--it is great fun to watch things get big again with the mammoth A380. This does recall the excitement of an earlier era, several decades ago, when we last witnessed awe-inspiring breakthroughs in aircraft design
I wonder if this plane is more of an engineering innovation, or a marketing one? In other words, did it require a leap forward in design to make such a big plane possible? Or has it been possible for a while to do something like this, and it was more a matter of finding the right buyers at the right price to make such a plane profitable on the right routes?
Allan McArtor: The market always dictates what the mission of the aircraft is going to be. The engineering follows to ensure that the aircraft accomplishes the mission the market needs accomplished. The A380 is the right aircraft for the next generation of passenger market. In creating the aircraft, it is a big step forward in terms of new materials, scale of the aircraft, the wing design and the first-ever use of 5000 lb- per-square-inch hydraulics in a passenger aircraft. It’s truly innovative.
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Washington, D.C.:
Just a quick follow up to the U of Texas question:
If, as you say, indirect subsidies are OK under the 1992 agreement, (and because I am sure Airbus gets them too) why does Airbus keep bringing them up in complaining about Boeing? It seems to me that the launch aid you receive isn't like that and Boeing doesn't get that aid from its government, so why should you?
Thanks!
Allan McArtor: Just to correct the record, Airbus has not been complaining about Boeing. It has been Boeing who has chosen to "up the rhetoric." Airbus does not intend to pick a fight over subsidy issues. However, it will not allow any challenges by Boeing to go unanswered. Both Boeing and Airbus receive government support. The rules for that support are clearly defined in the 1992 Agreement.
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McLean, Va.:
I read a lot about how Airbus and Boeing had projected two different models of the future of the airline industry, resulting in two very different perceptions of how much demand there would be for big planes like the A380. (Boeing, as I remember, said they believed the future would feature more "point-to-point" travel with mid-sized planes and focused their R&D there.) I am curious -- in your mind, what are the critical differences in assumptions the two companies made about the airline market that led them to such different conclusions?
Many thanks.
Allan McArtor: Airbus believes that there will be future growth in both point-to-point travel and hub-to-hub markets. Airbus has a family of aircraft solutions to serve both of these segments. The A380 is specifically designed to more efficiently serve hub-to-hub. The A330 and the A340 have proven themselves with global airlines to serve point-to-point. A dramatic cause-in-point is the recent nonstop service introduced by Singapore Airlines using the long-range A340-500. Singapore flies direct to Los Angeles and direct to New York. These 18 1/2 hour flights show that four engine point-to-point service is preferred by international carriers.
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Sterling, Va.:
Allan,
I'm a facility/real estate consultant and an airplane enthusiast. I was wondering how will the passengers board and de-plane the A380? Will the airports be utilizing a special jet way or will it take longer for people to board?
Also, it was a pleasure seeing the making of the A380 on TV, but I can't believe parts of the plane were made in separate countries. Doesn't it make more sense to build a facility where you can construct everything at one location instead of the logistic nightmares with shipping and calculating high tides? And are there hangars large enough to maintain these future aircrafts for C & D checks?
Allan McArtor: Airports are handling this in different ways, though the aircraft has been designed to make boarding a quicker and easier process than current jumbo aircraft. The A380 has wider doors than a 747 and a much wider staircase between the upper and lower decks. In addition, it offers the capability for airlines to do simultaneous dual-deck loading and unloading of passengers, if the airline and airport wish to do so.
The industry will be building some new hangars for the A380. It's part of airline's investment in order to reap the market benefits offered by the A380 (customer service, costs, etc.). With respect to the logistics of making aircraft the way we do, Airbus has invented and proven the concept of distributed manufacturing, with components being brought together for final assembly in one place. In fact, Boeing says is looking to do the same thing for their 7E7 production.
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Gaithersburg, Md.:
How do you respond to critics who say that the Airbus focus should be on a mid-sized aircraft, a medium capacity and range aircraft, i.e. a replacement for the A300 and A310 family, with higher efficiency as an important part of the design, perhaps to compete with the 7E7? Has that been considered? How does the market opportunity for filling such a niche compare to the opportunity for the ultra-jumbo A380? Has such a study or comparison been done?
Allan McArtor: Airbus is satisfied that it has a modern family of aircraft to serve virtually all segments of the airline industry. Airbus' market share lead demonstrates that the airlines share this confidence. Airbus constantly listens to its customers and develops innovative fleet solutions and customer service networks to solve and satisfy their demands.
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Bowie, Md.:
Can or is anything being done to improve economical service to non-hubs? It costs less to fly 3,000 miles than 300, depending on destination.
Allan McArtor: I share your pain. Pricing is done by airlines and is driven by yield management programs. Competition affects pricing models. Our job at Airbus is to provide the safest, most efficient and most comfortable tools with which airlines can serve their route structure.
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Annapolis, Md.:
Hi--
If you ran the FAA what changes would you make to the FAA and the aviation industry in the U.S.?
And what specific actions would you take to increase the capacity of the National Airspace System in the U.S.?
Allan McArtor: Like all Administrators, work to stabilize funding and recruit the best technical and operational talent.
On the Airspace question... stay focused on GPS and Galileo technologies and encourage the development of and access to General Aviation (small aircraft) airports.
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Tucson, Ariz.:
Mr. McArtor, thank you for taking my questions.
Two questions immediately come to mind.
1.Why, in the last thirty or more years, hasn’t the speed of civilian jetliners been increased to near supersonic levels? It would appear that the capability exists to shave at least four hours from a twelve hour flight using Houston to London as an example.
2.What plan do you have to handle speedy egress of passengers once the aircraft arrives at the gate? Even with today’s Jumbo Jets it can become maddeningly long, sometimes enough to cause one to miss connecting flights.
M.Atlas
Allan McArtor: The principles of aerodynamics make transonic flights impractical. Over .9 Mach drag increases dramatically. Fuel burn then skyrockets. The increase in speed does not bring with it a measurable value to the traveler. Therefore, commercial airplanes will always cruise at or near current speeds.
I believe that truly supersonic aircraft such as the Mach 2 Concord will, at some point, return to commercial service.
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Powell, Ohio:
Are you developing hydrogen-powered jetliners?
Allan McArtor: No. NASA and others have been exploring future propulsion technologies as well as high-speed civil transports.
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Moderator:
Our hour is about up. Thank you, Allan, for joining us!
Allan McArtor:
It's been a pleasure. I've been impressed by the level of interest and depth of questions that have been posed.
If you would like to learn more, visit the related links at the top right of this screen or see what's happening LIVE from Farnborough! Thanks, and signing off live from Farnborough!
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