Boeing Checks Airbus

Sometimes Boeing's (NYSE: BA  ) competition with its European rival Airbus seems more like a to-the-death dogfight than a business competition. The global aircraft market is huge, so it might seem like there would be plenty of profit to go around. But with all the vitriol surrounding each company's moves and countermoves, the dynamic between Boeing and Airbus seems more akin to a zero-sum game. In fact, to some extent it is just that. And that's what makes Boeing's latest countermove so significant.

Boeing announced Tuesday that it will build a longer version of its 35-year-old 747 in the wake of two firm orders for a total of 18 planes, which will be used as cargo haulers. The Chicago-based airplane manufacturer plans to use technology from the new 787 to make the old plane more fuel-efficient and quieter. But given that the new jet, dubbed the 747-8, will be built on an existing design, this is a relatively low-cost maneuver for Boeing. Even if the first two deals are significantly less than the $5 billion list price, the company likely already has made up a good portion of the 747-8's costs.

Contrast that with the new A380. The gigantic plane cost an estimated $10.7 billion to develop. Airbus has orders for 159 of the jets, but just to break even, it has to sell 250. And the market for jumbo aircraft has not been vibrant: Boeing hasn't sold a passenger version of the 747 for several years. Now the A380 will have to compete with the 747-8 in that sluggish segment, and it looks like it's facing an uphill battle. The A380 may have the capacity advantage, but Boeing is claiming the 747-8's per-trip cost will be 22% less than that of the A380. Given the dire straits of the U.S. airline industry, many carriers may go with the low-cost, albeit older, option.

To be sure, Boeing's new 747-8 probably won't be very profitable for the company, but that's not the point. The idea is to weaken Airbus by limiting or even eliminating profits from the A380, and thus reduce Airbus' capacity to develop new planes. In this instance, Boeing may have accomplished that mission.

Related Foolishness:

• Airbus' Global Allies
• Boeing's Costly Dispute
• Boeing's WTO Dilemma

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