It all began so cozily. The project to build the world's biggest commercial airliner, the A380, generated positive headlines all last year, with test flights going smoothly and orders piling up.

Now, however, the A380's ascent to the sky has turned into an economic free fall. In July, Airbus, the multi-national daughter company of EADS, had to announce delivery delays of up to six months, and earlier this week, company officials had to push that deadline back by another year. As a result, Airbus will now deliver between two and four A380s in 2007, instead of the up to 25 originally planned.

The losses are massive: The company -- a joint project concern of Germany, France, Britain and Spain -- will have to pay between $2.5 billion and $6 billion in compensatory damages, a figure that may rise if unhappy customers cancel their orders and buy from U.S. competitor Boeing instead. EADS shares have plunged by roughly 35 percent in the last six months.

Mismanagement and production blunders already caused EADS and Airbus to replace top managers; the new leadership now plans several tough cost-cutting measures to bring the Airbus back on course.

Leading French newspapers have mentioned a shock therapy program called "Power 08," which would likely result in job losses at several Airbus production facilities in Europe.

EADS aims to cut some $2.5 billion a year in costs, and high on the list are the main A380 facilities in Toulouse, France, and Hamburg, Germany.

"There was blatant lack of efficiency at Airbus, as for years the company has worked with too much costs. That comes to surface in times of crises," Ulrich Horstmann, aviation sector analyst at the Bayerische Landesbank, told United Press International. "When it comes to research and development, materials, cockpit design and production speeds, Boeing is well ahead by now."

The restructuring program is believed to include moving the production of the A380 entirely to Toulouse, while building the A320 model, a mid-sized plane, exclusively in Hamburg.

France has repeatedly attacked the Germans for faulty assembly of the A380 in Hamburg, while the Germans fired back that incorrect assembly plans from France were the cause of the glitch. French Labor Unions feel Hamburg should cover most of the damage, but Berlin has protested.

With a number of uncertainties still in the air, politicians from both countries have started to flex their political muscle.

Some 12,000 people work in the Hamburg facility, 2,500 on the A380 alone.

German Economy Minister Michael Glos, who has warned France it shouldn't burden German workers with cost-cutting measures, Thursday met in Berlin with Airbus head Christian Streiff for crisis talks. Streiff had told the Financial Times it may take Airbus more than a decade to catch up with Boeing, and that more Airbus projects, such as the A400M military transport aircraft, may run into trouble.

Earlier, the German government considered increasing its influence at Airbus by giving the state-owned KfW bank the green light to invest.

"The question of a KfW investment is a theoretical possibility, but not a currently pursued solution," a government spokesman said Wednesday in Berlin. "But we will make sure... that all means of restructuring are made in a way that is balanced for all European states."

While many jobs are at stake, a decent business model free of political interests may be what the company needs to save its existence, observers say.

"There is always the attempt to pull power to your side," Horstmann said. "But more political influence could be fatal for Airbus. Then, you would have to ask very seriously: Is this company still capable to compete on the stock market?"

The crisis at Airbus also exposes what went wrong at the company: To satisfy the various political interests, production of the A380 has been split across the continent, leading to efficiency glitches and high costs.

The crisis at Airbus may be a unique chance for Boeing to hammer the nails into the Airbus coffin, observers say.

Already the 787 Dreamliner, Boeing's new mid-sized long-distance jet, far outsells Airbus' A350 model. The Europeans have already decided to update the A350 project for another $5 billion -- so money, given the A380 crisis, is growing scarce.

If Boeing were to play the game aggressively, it would introduce a newer model of its ageing 737, a sector where Airbus still has the upper hand with its more modern A320.

"Then Airbus would have a real big problem, because the A320 right now is the company's only cash cow," Horstmann said.

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