With airline traffic largely recovered following the Sept. 11, 2001, terrorist attacks, the outlook for the aviation market is once again improving. "We have good signs of recovery," said Philippe Camus, CEO of EADS, which owns 80 percent of Airbus. "Passenger traffic is improving very rapidly."

Last year, Airbus beat its American rival, Boeing, on airplane deliveries for the first time in its history, providing 305 new airplanes to companies compared to Chicago-based Boeing's 281 -- a figure it could beat this year. "We're expecting to deliver more aircraft in 2004 than in 2003," Camus said. "We think it will continue in 2005 because we are seeing all the signs of a recovery."

Prospects are also improving for Boeing. "We're expecting annual growth of 5.2 percent in our passenger business and 6.2 percent in freight services," Boeing commercial airplane boss Alan Mulally told reporters on Monday.

Boeing bets on smaller planes, more non-stops

Boeing is expected to use the Farnborough show to introduce its new 7E7 aircraft, a highly efficient model with which it hopes to put the brakes on the success of Airbus's A-330 aircraft. The company says the mid-size 7E7 can fit up to 257 passengers and is 20 percent more fuel-efficient than other aircraft in its class, offering the same range for long flights as larger aircraft. Boeing has confirmed orders for 62 7E7s, including 50 from All Nippon Airways and two from Air New Zealand. Thirty airlines have also asked Boeing to submit proposals for outfitting them with the new model.

"The 7E7 has generated the most interest we have ever got early on when launching a new aircraft," Mulally told reporters.

In terms of the general market, Boeing has estimated that there will be a demand during the next 20 years for 25,000 aircraft, worth a total of $2 trillion. This week, the company announced it would hire 2,000-3,000 new employees, Boeing's first round of hiring since the terrorist attacks, after which is pared its total number of employees from 198,000 to 157,000. The attacks precipitated one of the worst crises in Boeing's history, with many airlines canceling, delaying or reducing plane orders. In 2001, the company was delivering 527 airplanes a year -- nearly twice its current level.

Whereas Boeing is focusing on a new trend of non-stop, long-haul flights from second-tier regional airports, its European rival Airbus is focusing on eliminating Boeing's dominance in the jumbo jet market. Airbus says its new A380 double-decker jumbo, set for introduction in 2006, will help ease congestion at hub airports like Frankfurt, London or Paris. Airlines can squeeze as many as 555 passengers into an A380 compared to 400 in a Boeing 747, long the jumbo jet market leader.

Boeing chief criticizes 'subsidies'

In an interview published in the Welt Am Sonntag newspaper on Sunday, Boeing CEO Harry Stonecipher criticized what he described as "European subsidies" for Airbus, and said he was convinced that the leaner 7E/ was the right answer for future air traffic and not the enormous Airbus A380.

But Airbus dismissed Boeing's complaints, saying they were will within the terms of an agreement thrashed out by US and European authorities in 1992 on launch aid.

"We are not receiving subsidies," Airbus CEO Camus said. "We are receiving loans and we will repay the loans."