Update, October 15:

Bloomberg reports that Airbus is scaling back plans to increase production of the A320 and A330 lines. Here is the story. This prompts us to highlight an item in The Wall Street Journal piece below: Boeing won’t up production to catch up delivery delays due to the strike (though this is really no surprise).

Original Post:

With Boeing dominating the news in recent months due to delays with the 787, the 747-8, the controversy over the KC-X program and the labor difficulties, a little news about Airbus is refreshing.

As previously reported, Airbus has its own delay issues with the A400M military program. A380 delays continue to make news from time-to-time. The Wall Street Journal just published a long piece about Airbus, saying the European company is “unshaken” by economic turbulence. Unlike most WSJ articles, this one is free. It’s worth a read.

Meantime, from what we are hearing in the market, Airbus continues to make efforts to benefit at the 787’s expense by selling the A330 to disappointed 787 customers. Sales of the A330 have been more than healthy and with the anouncement that the company is designing an A330 Heavy with longer range, Airbus is making a concerted push to further expand the A330 market.

With the 787 troubles, Boeing doesn’t have delivery slots (beyond the occasional hold-back) until 2017 or 2020, depending on who you believe. Airbus has A330 delivery slots as early as 2012. The A350 is scheduled to go into service in 2013 (which, given the A380 performance and the 787 issues, draws a lot of skepticism even at this early date) but Airbus believes the A330 could be produced alongside the A350 for another decade–as a passenger airplane. While an A350 Light is being discussed that would clearly be a replacement for the A330, this plane probably would not be available until 2015 or later, if at all.

Boeing contemplates a second line for the 787, something that is required if there is any hope to catch up on program delays in a reasonable amount of time. But the question not only is when can Boeing do this but also where will a second line be established. Common sense says do it at the Everett, WA, plant where the 787 line is now. But the IAM strike and the likelihood of one by SPEEA suggests Boeing management has had enough and we think it entirely possible a second 787 line could be opened in a right-to-work state.

(For non-Americans, a right-to-work state means no unions required.)

If this happens, might an interim period be undertaken for Line 2 to cover production while Line 1 is shut down and moved alongside Line 2 in the right-to-work state? Call us conspiratorial, but we certainly see a scenario where this could happen. We believe the odds are much better than 50-50 that the replacement airplanes for the 737 and 777 won’t be built in Washington State. Why, then, keep the 787 here? The 747 and the 767 will die here, but these are both at the end of their life cycles anyway (final outcome of the KC-X program being the only variable).

Airbus, meanwhile, chugs along with the A380 (and A400M) the only hiccups (or up-chucks, as the case may be). The company is working on improvements to the A320 that will reduce fuel burn by several percentage points; Boeing is only doing minor improvements that customers hope will gain as much as 3% fuel improvements but say could be as little as 1%.

Pratt & Whitney began testing its Geared Turbo Fan on the A340-600 test bed owned by Airbus. Although Airbus cautions against reading anything into the use of the A340 as the platform, observers speculate that this could lay the groundwork for Airbus to put the GTF on the A320 as an interim step toward a full replacement airplane, not expected before 2018 or 2020. An A320 GTF theoretically could be certified by 2012 or 2013.

Boeing responds by saying the GTF could be fitted on the 737, but the problems are greater than on the taller A320. CFM International is working toward certification of its new LEAP-X powerplant, an entirely new engine, which is promised to reduce fuel burn around 12%-15%, similar to the GTF. But certification isn’t promised until 2016.

Airbus’ A330 Heavy, it says, will have more range than early models of the 787 (something Boeing disputes) because its analysis concludes that the 787 will be heavy and fuel burn promises of the GEnx and Trent 1000 engines won’t live up to promises. Meantime, Boeing works on a Product Improvement Package for the 777 which Emirates says provides a 10% operating cost improvement.

Airbus will likely finish this year with a substantial sales lead over Boeing.