THEY APE, THEY DON'T INNOVATE:

Paris Air Show No Party for Airbus: Plagued by problems and delays, the A350 widebody is trailing its more fuel-efficient rival, Boeing's Dreamliner (Carol Matlack, 6/15/07, Business Week)

The A350 saga underscores that Airbus has been, in many ways, paralyzed for the past two years. Delivery of its A380 megaplane, originally scheduled for early 2006, is almost two years behind schedule because of wiring problems caused by mismatched design software. The delay plunged Airbus $750 million into the red last year and is expected to wipe out more than $6 billion in projected profits through 2010, denying the company a key source of financing to develop the A350.

Multiple redesigns of the A350 have already pushed its planned launch to at least 2013, five years after the 787 is expected to enter service. And the A350 has few major customers apart from Qatar, which had ordered an earlier version of the plane and recently announced it would buy 80 of the revamped model, known as the XWB. Boeing (BA), meanwhile, has mopped up 582 orders for the Dreamliner, giving it a huge advantage over Airbus in widebody planes, the industry's most lucrative sector.

Yet the financial hit from the A380 is only one reason for the A350's painfully slow takeoff. Airlines are worried that the plane, which Airbus says will have an aluminum frame covered with composite carbon-fiber panels, still can't match the efficiency of the all-composite 787. Airbus says they're wrong, and that more airlines will order the A350 once they see detailed specs.

But at least one big customer appears to have walked: Steven Udvar-Hazy, chairman of aircraft-leasing group International Lease Finance Corp. (AIG), the world's single largest aircraft buyer. He has repeatedly criticized the A350's design, and ILFC is set to place a major Dreamliner order during the Paris show, according to people familiar with the situation. "This air show will be brutally hard for Airbus," says Doug McVitie, an aerospace analyst in Dinan, France.

Why doesn't Airbus just respond with an all-composite A350? For one thing, the Europeans are several years behind Boeing in research and development on composite materials.