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Airbus A330 gets second wind as Boeing 787 delay riles airlines

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(Bloomberg) -- Airbus SAS is churning out its A330 wide-body aircraft in record numbers, and has rival Boeing Co. to thank for the 17-year-old jet's second wind.

Production of the twin-aisle jet will rise to 10 a month by mid-2013, from eight now, to satisfy "unprecedented" demand, the Toulouse, France-based manufacturer said Thursday. 

The jet, which sells for about $200 million at list price, is a favorite in the fleets of carriers including Delta Airlines Inc. and Cathay Pacific Airways Ltd.  

Delta, the dominant carrier serving Minnesota has 32 Airbus A330s in its fleet.

"There's frustrated demand out there for the plane," Airbus sales chief John Leahy said in an interview. "I wish I could get my hands on another 15 or 20, even for 2012."

Airbus is revving up production as Boeing grapples with more than three years of delays on its 787 Dreamliner, announced in 2003 as an alternative to the A330 after Airbus quashed demand for the Boeing 767 model that's almost twice the age of the A330. 

Boeing's Dreamliner woes have left dozens of airlines with holes in their fleets, driving some to other aircraft.

The A330 twin-engine aircraft, which seats 250 to 330 passengers and entered service in 1994, flies as far as 6,450 nautical miles, servicing routes across the U.S. or the North Atlantic, as well as many intra-Asian connections. The larger A330-300 can cover about 5,500 nautical miles.

Longest Fuselage

Cathay and Delta operate the largest fleets of A330, with 32 aircraft in service each. Airbus also offers the A340, with an identical cabin width, though with four engines as well as the longest fuselage of any aircraft to accommodate more passengers.

With about 1,100 orders in total today, the Airbus A330's best year was 2007, when it won 186 orders. That was the same year Boeing announced its first delay on the 787. Demand has crept up in recent years, with 62 orders for the jet in 2010.

Boeing concedes that its delayed 787 has helped its rival.

"The A330 had the best year ever, because we were late and airlines needed a gap-filler airplane," Boeing Commercial Airplanes President Jim Albaugh said Feb. 2, speaking at a ceremony where Boeing rolled out the 1,000th 767 it has built. 

The 767, which started flying in 1982, is the second wide-body airliner in history to reach the 1,000 mark, after the Boeing 747 jumbo.

Shipments include aircraft outfitted as refueling tankers to armed forces in Japan and Italy. Airbus also offers the A330 in a configuration as a refueling tanker, and the two companies are competing to upgrade the U.S. Air Force fleet.

Dreamliner Woes

The Dreamliner is more than three years behind schedule after Boeing struggled with parts shortages, manufacturing defects, incomplete work by suppliers and redesigns. The Chicago-based manufacturer, which had to concede the industry lead to Airbus in 2003 and hasn't regained it since, aims to put the Dreamliner into service by the third quarter of this year, rather than May 2008 as originally planned.

Shares of European Aeronautic Defence & Space Co., the parent company of Airbus, have advanced 42 percent over the past 12 months. Boeing stock has gained 15 percent in the period.

The Dreamliner delays have forced the company to pay penalties to airlines that were counting on the plane to offer new routes. Boeing has won 847 orders for the jet in total, with All Nippon Airways Co. slated to fly the first one.

"This is the biggest embarrassment for Boeing," said Richard Aboulafia, vice president of Fairfax, Virginia-based aviation consultant The Teal Group. "The 787 penalty payments are going directly to Airbus for A330s."

Optimizing Capacity

Part of the A330's appeal stems from its range and reliability, which has made it an aircraft of choice for airlines connecting longer-distance routes between Europe and the U.S. that don't require longer-haul aircraft such as upcoming Airbus A350 aircraft or the Dreamliner, Airbus's Leahy said.

"It's a very flexible plane for airlines that can be used in various configurations that can bring value to all sorts of airline business models,"  said Henri Courpron, chief executive officer of International Lease Finance Corp., which has 89 of the planes in its portfolio. "The A330-200 has phenomenal range, that allows airlines to open new routes and go places not reachable before with twin-engine planes of that size."

The A330 is also popular because it is readily available. The 787, apart from being delayed, is sold out for years, while the A350 wide-body aircraft is still being assembled and won't fly before the latter part of 2013.

Boeing's Albaugh said constrained supply of wide-body aircraft over the next decade may help rekindle demand for the 767, for which Boeing has only 49 unfilled orders out of a total of 3,419. Lower production costs will also help demand, he said.

Such surprise boosts are not uncommon in the aviation industry because of a change in market conditions, or another manufacturer's difficulties, said Coupron.

"The 787's been delayed, and certainly that's given the A330 a second life that nobody expected," he said in a telephone interview. "There's always a silver lining."