SINGAPORE/PARIS As Airbus (AIR.PA) races through flight testing of its newest plane, the next-generation A350, Europe's planemaker faces growing battles to secure a future for the A330, until now its only truly lucrative wide-body jet.
Twenty years after it entered service, the 250 to 300-seat jet has repeatedly been pronounced dead by rival Boeing (BA.N) but refuses to lie down, outliving its A340 sibling and surviving for now the arrival of lighter new jets like Boeing's 787 and the A350.
But analysts say time is finally ticking on Airbus's most profitable wide-body jet, despite a steady series of changes aimed at prolonging the end of its production cycle and with over 1,000 still in service.
Without a fresh burst of sales or a slowdown from current record production levels, they say, Airbus faces a sharp drop in deliveries from 2016 onwards, with the visible backlog of undelivered aircraft now worth just 26 months of production.
"The A330 had an amazing past five years, not only because of its merits, but because Boeing's 787 was delayed," said industry analyst Richard Aboulafia at Teal Group.
"But with the 787 hitting (its targeted) production of 10 aircraft per month, that is going to crowd the A330 out of the market space pretty quickly," he added.
That leaves Airbus with a two-fold challenge. It must decide
how best to maintain a foothold in the 200 to 300-seat market, where it first developed jets more than 40 years ago and which Boeing later targeted in part with its 787 family.
The version of the A350 that Airbus originally hoped would defend that spot, the 270-seat A350-800, has sold poorly and is likely to remain sidelined compared to the 314-seat A350-900.
And with the A350 only gradually building up output until 2018, experts say Airbus faces a hole in revenue and cash flow as a gap opens between peak output of the A330 and that of the A350 -just as it also wrestles with a complex transition between versions of its other main cash cow, the A320.
Even though orders may not be as bleak as they appear, with some countries still to approve deals, Airbus has already started looking at ways of heading off any output gaps.
Last year it broke from a pattern of beefing up the A330 to fly further with more payload and announced a leaner Regional version to compete in the key Chinese domestic market.
Ostensibly the aircraft is the same, but its performance will be artificially capped to help save airlines save on maintenance and statutory bills like landing fees.
Such an aircraft would be a niche product aimed at countries with congested domestic markets like China and India.
Morphing the plane in a different direction, Airbus is also looking at the possibility of new engines to boost performance in its core activity of flying medium- and long-haul routes.
It has given itself until the end of the year to make a decision but could make a move at Farnborough Airshow in July.
But industry sources say Airbus has already raised the stakes by offering to increase its industrial presence in China with an A330 cabin centre. It already assembles small jets there.
"We have always been open to additional industrial co-operation when the market supports it," Chief Executive Fabrice Bregier said at the recent Singapore Airshow, asked about the first report of such a proposal in Aviation Week.
In response, market watchers say Boeing has launched a counter-offensive to halt the A330's latest assault on China.
Officials with the U.S. firm acknowledge that Airbus's A330 Regional would save just over 10 percent in operating costs.
But they argue this would not compensate for the extra fuel needed for a heavy aircraft like the A330 when it is operating on short routes instead of the long ones it was designed for.
Adapting the industry playbook, they say it would be more profitable to fly two smaller Boeing 737s instead, because the Airbus would burn 12 percent more fuel than both combined.
Airbus officials argue that China's crowded skies and airport congestion rule out adding flights, so the only option is to boost capacity. About 80 percent of China's airspace is under military control, leaving scarce room for traffic development.
That could be changing as China seeks to boost the low-cost airline sector but there is no clear-cut rule on whether more flights are the right marketing tool, said Ascend analyst Rob Morris.
STRATEGIC MARKET, TACTICAL TOOLS
But critics of Airbus's plans have a fallback argument.
Boeing, they say, is likely to try to persuade Chinese airlines that even if they want to put A330s on domestic routes to ease congestion it would be better for their balance sheets and more practical to redeploy them from international ones, rather than buy even more A330s with declining resale values.
Airbus officials counter that it would cost millions of dollars to reconfigure jets in that way.
China is one of the most strategic markets for both companies but analysts say they are also behaving tactically.
Both have gambled on lighter weight carbon-fibre technology but are unable to deliver as quickly as airlines would like, and are meanwhile carving out sales pitches playing up their existing products.
The battle looks set to revive tensions between the two dominant planemakers in the $100 billion annual jetliner market that last erupted in an advertising war in 2012.
Taking aim at Airbus's flexibility over pricing of the A330, whose development was paid for long ago, a Boeing executive said it would be a "losing proposition" against the smaller 737 in China, even if Airbus gave up any gap in price.
An Airbus official retorted curtly, saying Boeing's own data was "veracity-challenged".
(Editing by Greg Mahlich)