EADS: Selling A380 In U.S. A 'Challenge'

BERLIN (AP) -- A huge order for the Airbus A380 from Emirates airline means the superjumbo has passed a key "acid test," but selling it to U.S. airlines remains a challenge, the chief executive of Airbus parent EADS NV said Wednesday.

Louis Gallois said in an interview with The Associated Press that the order from a customer which already has 10 of the hulking planes flying is "a clear indication for other airlines that this airplane ... is a winner."

That "means the acid test of delivering the airplane to an airline is successful," he said.

Airbus now has 234 firm orders from 17 customers principally in Europe and Asia -- and not a single U.S. order.

Airbus is now be hoping for a smoother ride for the A380, which has suffered costly delays. The company has struggled to ramp up A380 production because the cabins of the hulking plane require greater customization than other plane models.

Selling the double-decker plane to U.S. airlines "is a challenge for us," Gallois acknowledged.

Airbus designed the A380 on the assumption that international airlines will need bigger aircraft to transport passengers between ever-busier hub airports.

Boeing Co. has taken a different approach, betting that airline passengers prefer point-to point transport.

Gallois spoke at the Berlin Air Show, where Airbus on Tuesday received an order for 32 more A380s from Dubai-based Emirates -- meaning the airline eventually will have a fleet of 90. The order, by far the biggest at the show, represents $11.5 billion at catalog prices -- although airlines often negotiate steep discounts.

EADS is also cheering the dollar's rise against the euro. it has been troubled by the euro's strength over recent years because its planes are priced in dollars although many of its costs are in euros.

The European currency has slid rapidly in the wake of the Greek debt crisis, and is now trading about $1.20, compared with over $1.50 last November.

"We are at a reasonable euro level, we are at the average historical price of the euro converted to U.S. dollar, and I think it's a level playing field for competing with American industry," Gallois said.

EADS' most eye-catching effort to compete is its upcoming bid against Boeing Co. for a Pentagon contract worth at least $35 billion to build 179 refueling jets -- the latest round in a longrunning and politically charged battle.

The company said in April that it planned to make its own bid after its one-time American partner, Northrop Grumman Corp., backed out.

"We have found the partners we were looking for for sensitive equipment and now the team is complete," Gallois said, stressing that EADS will remain the primary contractor.

He declined to name the business partners.

Gallois also said the company still is considering the possibility of U.S. acquisitions in view of its "very positive" cash position.

"We have the capacity to make acquisitions, and the priority (is) the United States," possibly in areas of defense, security and services.

However, any such acquisitions depend "on the opportunities and I don't want to fix any time schedule for that," he added.

This year, Airbus hopes to get on top of two big projects that have been using up its engineering resources and bleeding cash -- mastering the operational challenges of the A380 and finalizing contract changes with customers for the A400M military transport plane.

Gallois said "for the first time that we have complete control of the manufacturing process" for the A380 and that costs were within the forecast levels for the first time in the first quarter of 2010 -- although they remain "too high."

The plane won't make a profit for years. Gallois said it will "deliver EBIT improvement and cash in 2014-15," referring to earnings before interest and tax, though that will depend on the value of the dollar.

American airlines "are not buying big airplanes, but the day when they have the capacity to do that, they will recognize as other airlines that it is the perfect answer to the traffic jams at airports and the perfect response to the increase in oil prices," he said.

RBS analyst Sandy Morris said American airlines are geared up to service point-to-point airports and aren't about to change strategy.

But he said "one day I think it's inevitable" they start looking at the A380.

"Point-to-point is a rather bull market strategy because it requires aircraft that are quite expensive" and consume a lot of fuel.

"Hub-to-hub is more robust in an average economy like the one we may have over the next few years," he said.

EADS presented the A400M to the public for the first time in Berlin.

It is still negotiating with the seven customer countries to finalize details of an agreement reached in March that allowed the over-budget and much-delayed project to continue. Despite government budget-trimming drives across Europe, all involved are "negotiating inside the frame" of the March accord, Gallois said.

He was hoping for a final deal "before summer, but perhaps it will be fall."

In a few years, "there is a strong potential for export, because this airplane is absolutely alone in the market," he said.

Vandore reported from Paris.

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