Airbus pins hopes on superjumbo orders as BA prepares to sign up with Boeing

Airbus Industrie is set to lose out to its arch-rival Boeing on a $2bn (£1bn) order from British Airways to expand the UK carrier's long-haul fleet.

The order for 10 wide-bodied aircraft is due to be placed by BA in the next four weeks and Airbus executives appear to be resigned to the airline selecting the Boeing 777 jet rather than its A330 model.

Airbus was always second favourite for the BA order - the first it has placed for new aircraft in more than six years - as the airline's existing long-haul fleet is made up exclusively of Boeing jets. But the European manufacturer expects a bigger BA order to replace a large chunk of its wide-bodied fleet to go down to the wire. The order, potentially worth in excess of $10bn, is due to be placed before the end of the year and pits the new Airbus A380 superjumbo and the A350 XWB against Boeing's stretched 747-8 and 787 Dreamliner.

John Leahy, Airbus's chief operating officer for customers, said yesterday that he expected a very tight competition between the two plane makers for the prestige order.

A win for Airbus would be a huge boost to the A380, which is running $4bn over budget and two years late. Airbus does not now expect the A380 to start making money for 10 years, the break-even level on the $16bn development having been raised from 250 aircraft to 420 because of cost overruns and the sharp decline in the dollar, the currency in which all commercial aircraft are sold. So far, Airbus has 166 orders for the 555-seater jet from 15 customers and Mr Leahy said he expected a further 20 orders this year from two airlines, although these may be repeat orders from existing customers. Despite the well-publicised problems with the A380, which have led to three profits warnings from Airbus's parent company EADS and a string of top-level executive departures, only one customer, Fed-Ex, has cancelled its order. Two others, Qantas and Singapore Airlines, have actually increased the number of A380s they are buying.

The first A380 is scheduled to enter service with Singapore in October. Airbus expects to deliver a further 13 aircraft next year and 25 in 2008 to its other launch customers, Qantas, Emirates and Etihad, as production builds up to around 40 a year.

"This is going to be a game-changing aeroplane, the only minor problem was that we couldn't build it on time," Mr Leahy said.

However, with his smooth salesman's patter, he reels off the reasons why Airbus believes airlines will eventually be queuing up to buy the plane. The aircraft can hold 40 per cent more passengers than a 747 and yet it is 15 per cent more economic, seat for seat, and has half the noise footprint of existing jumbos. It also uses less runway to take off, climbs to its cruising altitude more quickly and is two and a half times more fuel efficient than aircraft were 20 years ago. For all these reasons, Airbus believes the A380 will provide the ideal riposte to the growing environmental backlash that aviation is facing.

The question, as ever, is whether there is sufficient demand for such an enormous beast. Airbus believes 20 per cent of the $2.3 trillion market for new aircraft over the next 20 years will be accounted for by A380-type jets. Boeing argues that the market will fragment, with passengers preferring to fly point-to-point in smaller aircraft such as its 787 rather than being packed 700 or even 800 a time into superjumbos.

But Airbus responds that the huge hubs such as Heathrow, New York, Hong Kong and Tokyo which the A380 will fly out of are major point-to-point destinations in themselves. For both environmental and economic reasons, it believes airlines will find the A380 more attractive.

Whether Airbus can make money from the A380 will also depend on its ability to cut costs. Louis Gallois, the chief executive of both Airbus and EADS, confirmed yesterday that the group's long-awaited restructuring plan - codenamed the Power 8 programme - would be unveiled in two weeks' time.

The plan will involve a 30 per cent reduction in overheads designed to achieve annual cost savings of €2.1bn (£1.4bn) a year by 2012. It is unlikely that Airbus will close any of its 16 production plants in the UK, France, Germany and Spain. But it will take the axe to its 80,000-strong workforce, with reports in France suggesting that 6,000 to 7,000 jobs may be shed, and is also expected to sell a number of its manufacturing operations or seek to bring in joint venture partners.

Peace and quiet at 41,000ft on giant gin-palace

The seat number on the boarding pass read 76G and with that my spirits immediately sank. Sure enough, as I entered the cabin of the A380 superjumbo I was invited to take a sharp right and make the long trek down to cattle class. No first class suite, complete with private shower and champagne welcome, for me. Not even a lie-flat bed. Just the company of my fellow backpackers, squeezed 10 abreast across the rear of this giant flying gin-palace.

Airbus had assured everyone that the seating on board the maiden press flight of the world's biggest passenger jet had been drawn at random. So how come the Wall Street Journal and Financial Times managed to bag seats in business class? As it turned out, the two-hour flight from Toulouse and back by way of the Pyrenees and Bordeaux was a very agreeable affair. Admittedly, there were fewer than 200 journalists on board, not the 853 passengers the A380 is certified to carry. But the overwhelming impression was not one of being crammed sardine-like into a cigar-shaped tube along with the rest of humanity. Rather, it was one of space and light and, above all, quiet. At 41,000ft you could actually eavesdrop on a conversation taking place on the other side of the 20ft-wide cabin. The captain explained this was because the A380 has half the noise footprint of a 747 jumbo.

The A380 promises to revolutionise air travel in other ways too. Although one of the launch customers, Emirates, plans to squeeze as many as 650 passengers on to some of its planes, Airbus has lined up an unnamed customer who wants a VIP version of the A380 complete with his or her own dining room, cinema, jacuzzi, bedroom and conference area.

The typical A380 is likely to seat around 500 passengers in double-decker formation - 370 in economy, 100 in business class and the rest in first. Yesterday's test flight took place in one of four planes destined for Abu Dhabi's Etihad Airlines but it will not resemble the aircraft that is finally delivered. Sensors and bits of wiring were still sticking out of seats, and oxygen masks dropped unnervingly from the ceiling in business class as the aircraft was taking off. But, important to report, it also landed, all 361 tonnes of it. And with quite a bump.