Boeing Beware

Boeing (NYSE: BA  ) needs to watch its back because Airbus is determined to keep its lead in commercial aircraft.

The Wall Street Journal reported Thursday that Airbus is getting serious about its planning for a new aircraft to counter Boeing's 7E7. The Boeing plane, which is not expected to begin service until 2008, is a midsize model that promises 20% fuel savings and an impressive flight range, all at a reasonable cost. The business case for the aircraft is solid and appears to be growing stronger every day: The 7E7 would address the problem of high jet fuel prices and is likely to appeal to upstart low-cost carriers looking to expand services to the international market.

Indeed, Airbus' response could be seen as a vindication of Boeing's strategy. Boeing, though, does not have the luxury of patting itself on the back.

Airbus' history is distinguished by its success in coming from behind by improving upon Boeing offerings. Airbus has gotten so good at this that the American aerospace giant's planes are now outclassed in some respects by those from its European rival. Many of the Airbus planes flying now sport newer designs than their Boeing counterparts. They are more efficient and arguably more comfortable for passengers. The process of one-upmanship even may be playing out outside the traditional airplane sphere, as Airbus gears up its wireless initiative to compete with Boeing's Connexion.

In this case, it seems Airbus is actually following Boeing's lead. The European outfit currently plans to modify the A330 to compete with the 7E7. The modified plane would reportedly not be as miserly with fuel as the 7E7, but because the Airbus would work from an existing design, the European company might be able to introduce its product first and sell it at a lower price. These possibilities should be enough to keep Boeing shareholders on edge.

Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.