FOCUS Airbus sets its sights on Boeing's Japan stronghold

The U.S. aircraft manufacturer has extensive partnership and supply arrangements in place with Japanese companies, ensuring that it has consistently won the lion's share of orders from Japanese airlines. "Airbus has 50 percent of the global market and 4 percent of the Japanese market. Something's amiss and everyone ought to get to work on it," EADS chief executive Louis Gallois told reporters in Tokyo, during a trip with French Prime Minister Francois Fillon and other business leaders.

Fillon on Friday pushed for Japan to buy Airbus aircraft during his talks with Prime Minister Yasuo Fukuda. "The prime minister has been extremely efficient and aggressive on this issue," Gallois said. "Industry has to do its job too, but there's a climate that needs to be created and the prime minister has done so remarkably," he added.

But Airbus has quite a bit of catching up to do.

Boeing describes Japan as "the largest single-country international market for Boeing commercial airplanes in dollar value," noting that up to June 2005, Japan had ordered 796 Boeing airplanes worth more than $70 billion -- based on 2004 dollars. "Japan is the one market where Airbus' presence is astonishingly small. You would expect any executive to focus on a market like that," said a London-based analyst. But Gallois' comments refer simply to an "aspiration" at this stage, Gallois said.

Japan's All Nippon Airways is the launch customer for the 787 programme, with 50 of the aircraft on order. Japan Airlines has also ordered the new aircraft. But delays to the programme -- the first flight is not now expected to take place until the fourth quarter, compared with its initial schedule of test flights beginning last August or September and a first delivery to ANA in May this year -- could be an advantage for Airbus in Japan.

However, the analyst cautioned: "It's a point against Boeing. The airlines will still want to know what Airbus has, and when it will be available."

Boeing has numerous partnerships, subcontracting or supply arrangements in place with numerous Japanese companies, including Mitsubishi Heavy Industries, Kawasaki Heavy Industries and Fuji Heavy Industries, and Airbus in recent years has made an effort to emulate this situation. "The problem is that Boeing owns Japan," the analyst said. "Nothing happens easily in this industry, and changing the balance could take a decade or more."

Between 2005 and 2025, Boeing expects Japan to be one of the largest buyers of commercial transports outside the U.S. "Boeing expects that Japanese airlines will require 1,176 airplanes, valued at approximately $147 billion (in 2003 dollars) during this period," the company said.

But Boeing's Toulouse-based rival is keen to win its share of this total and it has made some progress -- more than 100 Airbus aircraft already have been ordered by Japanese airlines, with at least 70 already in operation, the company said.

Airbus has also mirrored Boeing's strategy of establishing an industrial network among Japanese companies. Sixteen Japanese companies, including Kawasaki Heavy Industries, Mitsubishi Heavy Industries and Jamco, are suppliers for the A320 family. The A330/A340 programmes involve a total of 17 Japanese companies.

Airbus said it sees the the rise of low-cost air transport in Japan -- for which it says the A320 is ideal -- as one opportunity for growth. Japanese low-cost airline StarFlyer started operations with the A320 on the Kita-Kyushu-Tokyo route in March 2006. ANA is planning to establish a low-cost airline in Asia as early as the year to March 2009. However, the London-based analyst said that "although the A320 is a very successful aircraft, fundamentally, narrowbodies are a tiny minority in Japan."

The company is particularly keen to win orders for its A380 superjumbo aircraft. Focusing on the larger end of Airbus's range of aircraft makes sense, said the London-based analyst. "That's where the money is," he said, noting that although ANA has some Airbus A320 aircraft in service, "the two biggest Japanese airlines are very large long-haul airlines. They buy widebodies."

"With eight out of 10 main A380 routes expected to begin or end in the Asia-Pacific region over the next 20 years, Airbus sees Japan as a key market for the new aircraft," the EADS unit said.

"The A380 has forged even stronger partnerships between Airbus and the Japanese industry," Airbus said, adding that the "A380 programme business will bring around $4.6 billion to Japanese industry in the coming years."