(FORTUNE Magazine) – It's a story that has become hackneyed but still resonates in real life: After years of toil, the understudy finally goes on stage and brings down the house. The latest rendition of this show-biz perennial unfolded at the Paris Air Show in mid-June, where Airbus Industrie was thrust into the starring role. The European aerospace consortium--long derided as a mere job-creation program--dazzled onlookers with a combination of upbeat business projections, in-your-face marketing, and an adventuresome spirit that evoked aviation's pioneering past. When Airbus flew eight of its models in formation over historic Le Bourget Field, the spectacle symbolized the company's arrival as a leader in commercial aviation.

After three decades in the airplane business, Airbus has become an overnight success. With archrival Boeing only beginning to emerge from a tailspin caused by production problems and management turmoil, Airbus is climbing toward its long-stated goal of winning 50% of the over-100-seat airplane market. Along the way it is getting praise for its passenger- and pilot-friendly aircraft and winning over longtime Boeing customers like British Airways and UPS. "In prior years we found customers somewhat cautious about supporting Airbus," says a recent Bear Stearns analyst report. "This year it has become acceptable and, frankly, even stylish to laud Airbus and to chastise Boeing."

As a further claim on industry leadership, Airbus is beginning to develop the world's largest airplane. Code-named A3XX, the double-decker plane could carry 555 passengers on overseas routes--137 more than a Boeing 747-400; on routes around Asia, where airlines don't care as much about seating comfort, it might carry 750 people. Airbus will begin pitching the plane--prices will start at $213 million for the 555-seat version--to potential customers early next year; it's expected to fly by 2004. "This could make Airbus the dominant manufacturer," says C. William Kauffman, professor of aerospace engineering at the University of Michigan.

Yes--or no. At a cost of at least $11 billion, the A3XX program is a bet-the-company project with an uncertain outlook. (After taking its own close look at the superjumbo, Boeing concluded that it couldn't make the plane pay.) And getting the A3XX off the ground could turn out to be one of Airbus' lesser challenges. The consortium's executives would like to reorganize into something resembling a modern corporation. But the Airbus partners have been divided for several years over how to proceed, and the outlines of any agreement are murky at best.

Airbus was founded in 1970 as a consortium that now includes four companies: British Aerospace, DaimlerChrysler Aerospace, France's Aerospatiale, and Spain's Casa. In exchange for supplying components like wings and fuselages, each of the partners agreed to underwrite the consortium's capital expenses (sometimes with government loans) and to make up its operating losses. Over time the structure became politicized, inefficient, and financially opaque. Airbus, for example, pays negotiated prices for components, which means it doesn't always get the best deal. The partners vote on major issues in proportion to their ownership stake. The majority rules, but that doesn't eliminate public squabbles. Plans to produce a new 107-seat plane called the A318 were held up by the French, who didn't think they were getting their fair share of the work. To pacify them, some of the production for another plane, the A319, was moved to France from Germany.

Airbus' finances are just as tangled. Although the individual partners all say they made money selling parts to the consortium last year, Airbus itself wound up losing money--$204 million on sales of $13.3 billion. (Boeing made $1.1 billion on sales of $56.1 billion.) Airbus blames the losses on the high prices it paid the partners for components, but the claim is impossible to verify because it doesn't provide detailed financial statements. Boeing supporters in Washington have another explanation: They accuse Airbus of selling below cost in order to steal business from Boeing. Nonsense, says Airbus Chairman Noel Forgeard, a Frenchman: "We are not here to buy market share."

The cheery, elfin Forgeard, 52, arrived a year ago from Matra, a French aerospace manufacturer. Among his goals: to centralize decision-making, to impose sensible bookkeeping, and to make Airbus consistently profitable. Dragging the partners along has proved only slightly less difficult than arranging a Middle East peace settlement. Disagreements range from how the assets of the company will be divided to where the A3XX will be assembled. "The need for a single corporate entity is well recognized," insists Forgeard in an interview. "Everybody here is focused on it."

"Here" is Airbus headquarters near Toulouse, in southwestern France, a region known for creamy foie gras, 13th-century cathedrals, and the largest population of French college students outside Paris. A few miles from the city, within sight of the airport, Airbus occupies a campus of high-tech steel-skinned office buildings. A low-rise structure under construction at the center of the complex will house a full-size 237-foot mockup of the interior of the A3XX to show prospective customers.

Despite the pastoral surroundings, the activity is frenetic. In May alone, Airbus delivered 23 planes to Aer Lingus, America West, Iberia, Lufthansa, Northwest, Swissair, and United, among others. The consortium expects deliveries to rise 29% this year, on top of last year's 26% increase.

Every sale that Airbus makes is one that Boeing doesn't. Despite a bruising price war last year, Airbus captured 46% of all orders for airplanes with more than 100 seats, more than double its share as recently as 1995. In the first four months of this year Airbus won an amazing 78% of orders; even after Boeing landed a burst of new business at the Paris Air Show, Airbus' share for the first six months was 62%. One satisfied customer is US Airways, which has ordered 430 Airbus planes since November 1996. Says Chairman Stephen Wolf: "Airbus aircraft offer greater flexibility for wider seats, more overhead bin space, and more aisle space--all important in a consumer-conscious business."

Airbus is reaping the rewards of shrewd decisions made years ago. At the same time it has cleverly exploited gaps in Boeing's product lineup and marketed itself as a smart buy rather than a cheap imitation. Although it tries not to gloat, Airbus has also benefited from Boeing's well-publicized difficulties, including accident investigations involving two of Boeing's best-selling planes, the 737 and 747, and the shutdown of two assembly lines last year to fix production problems.

To avoid being cast as a niche player, Airbus early on decided to build a full range of planes: from the 107-seat 318 to the 380-seat 340. The wide selection enabled airlines to switch easily from Boeing to Airbus and to spread their maintenance costs over a whole family of planes rather than just one model. "Once you get an Airbus in your fleet, you tend to want more of them," says Frederic Brace, vice president of finance for United Airlines, which this year has taken delivery on seven 319s and two 320s. "They make a good plane that is very economical to operate."

Airbus has been clever about differentiating itself from Boeing. It designed the A320, its 150-seat workhorse, with a fuselage 7 1/2 inches wider than Boeing's 737, whose cabin structure dates to the 1960s-era 707. The extra room allows airlines to add an inch to every seat in a typical six-across configuration. "That inch makes a difference, because North American rear ends aren't getting any smaller," says Richard Aboulafia, director of aviation for the Teal Group, a research firm in Fairfax, Va. Airbus convinced airlines that the performance of the wider-fuselage planes wouldn't suffer, because a new wing design made the A320 more efficient.

At the same time, Airbus installed some airline-friendly features. Instead of customizing the cockpit for every model, as Boeing does, it designed a single flight deck so that pilots can move easily among different models. "It's a tremendous advantage to the airline to use the same crew member on several planes," says Ron Aramini, senior vice president of operations at America West, which flies 36 Airbus planes. A pilot needs as little as eight days of retraining to move from the single-aisle A320 to the wide-body A330, vs. several weeks to move from a Boeing 737 to a 747.

Airbus salesmen are not shy about delineating Boeing's perceived deficiencies. One Airbus executive derides Boeing's flagship 747-400 as "30-year-old technology" that is "certainly in decline." Another referred to the new Boeing 717 as "stillborn" and a "bastard product," because it is based on an old McDonnell Douglas design. He and others even speculated that Boeing would cancel the 100-seat 717 for lack of interest, a claim the company vehemently denies. In four years, however, Boeing has gotten just 115 orders--probably not enough for the 717, which is due out in September, to pay for itself.

All that is minor sniping next to disagreements over development of a superjumbo. Both Boeing and Airbus believe that air traffic will grow about 5% a year for the next 20 years. But Boeing, under pressure to improve returns to shareholders, insists a new jumbo won't be profitable. It cites a growing desire by passengers to fly point-to-point in smaller aircraft like the 777, rather than travel through airport hubs in bigger planes like a superjumbo. Says Alan Mulally, head of Boeing's commercial-airplane division: "We think the lineup we have is what airlines want, and there is no economic justification for a bigger airplane."

To Airbus, Boeing's attitude smacks of arrogance and defeatism. Philippe Jarry, the Frenchman who heads market development for the A3XX, says the big plane will reduce noise, pollution, and development pressures around airports because it will require fewer takeoffs and landings. "Boeing acts as if there are no constraints on airports, runways, or the environment," fumes Jarry. "I'm really surprised that the leading American manufacturer is so concerned about the bottom line that it says, 'Flying is more fun in our smaller planes. You should buy more of them.'"

The bitterness between the two companies dates to 1996, when discussions between Boeing and several Airbus partners broke down over joint development of a superjumbo. Economic feasibility and the inability of the participants to agree on a single design that would fit both product lines killed the talks. But Airbus officials suspected Boeing was more interested in delaying their plans than in moving ahead with the project. After the talks ended, Boeing considered reconfiguring its 747-400 with new wings and engines to reduce noise and fuel consumption. But when it concluded that the return wouldn't cover the investment, it abandoned the plan in January 1997.

Airbus, meanwhile, canvassed big airlines and discerned enough interest in a superjumbo to proceed with development. "It was a moment of truth," says Jarry. Additional support came from package carriers like Federal Express, which expect freight shipments to grow two to three percentage points faster a year than passenger volume. Says Don Barber, senior vice president of FedEx air operations: "The A3XX may be an option to increase our capacity per trip."

Airbus has consulted with more than 60 airports around the world to determine whether its big plane will be able to take off and land easily. Weight is critical, since Airbus has pledged that the A3XX will use the same runways as the 747, even though its fuselage is ten inches wider. The consortium has developed a new lightweight material called Glare, made of aluminum alloy and glass-fiber tape. If it could be used instead of regular aluminum to fabricate the body of the A3XX, the plane would be several tons lighter.

Today 1,000 employees from Airbus and its partners work on the A3XX, 600 of them full-time. To keep the plane headed in the right direction, Airbus meets up to 12 times a year with potential customers like United, British Air, and Japan Air Lines. Of the thousands of design questions that must be worked out, one of the most critical is how to get 555 people off the plane in an emergency. Airbus considered seating passengers in a single deck, or even in side-by-side fuselages, but then decided on the double-deck configuration because loading and unloading is easier. By making the plane taller rather than wider, Airbus also saves space at congested gates and on runways.

How passengers will feel when they board, perhaps after spending several hours in a crowded waiting area, is another question. To reduce claustrophobia, Airbus wants to recreate the atmosphere of an ocean liner by installing a wide staircase to connect the upper and lower decks. It also wants to build exercise rooms and sleeping quarters fitted with bunk beds in a portion of the cargo hold. Airbus has enlisted 1,200 frequent fliers in eight cities--three each in Europe and Asia and two in the U.S.--to critique its cabin mockups.

Aided by new technology and economies of scale, Airbus says the 555-seat A3XX will be at least 15% cheaper to operate per seat-mile than a 747-400; the 656-seat version will be nearly 25% cheaper. Boeing says its own assessments lead it to believe the smaller version of the A3XX will produce savings of one-half as much as Airbus claims. But Boeing is hedging its bets. In April an aviation trade magazine published a story headlined "Boeing Hones New 550-seat Transport Design." It featured drawings of an A3XX competitor that carried passengers in an ultrawide single deck with three aisles. Boeing insists the plans represent only one of several designs under study; at the very least the Seattle company seems likely to develop a derivative version of the 747-400 if the A3XX is built.

Might this be a repeat of the 1960s, when two new big planes, the Lockheed L-1011 and the Douglas DC-10, arrived simultaneously and thus ensured financial disaster for both companies? The next few years will tell, but Forgeard says Airbus is "absolutely committed" to pushing ahead. Airlines that want to buy the plane will have to take some bravery pills too. "The risk for Airbus is whether there's a market for the A3XX," says United's Brace. "The risk for airlines is, Can we fill it up? We have to be prudent in how we purchase it."

To pay for development costs, which could reach $15 billion, Airbus expects to get 40% of its funding from suppliers like Sweden's Saab, 30% from government loans arranged by its partners, and the final chunk from its own resources. Establishing a new corporate structure is essential to arranging this financing. A reorganization would also speed development of the plane by providing a mechanism for settling intrafamily squabbles, such as the current dispute between France and Germany over where the plane will be assembled.

Belatedly, Airbus is paying closer attention to operating costs. It has increased inventory turns from 1.5 in 1993 to 2.9 last year, though it is still below its goal of four. It has also reduced the number of workers on Airbus projects (most employed by partner companies) from 43,000 to 37,000, and raised sales per worker from $213,000 to $358,000. While conceding there is room for improvement, Airbus believes those numbers discredit critics who deride the consortium as a job-creation program. "Our challenge and our reward is shareholder value," says Forgeard. "This management is very focused on profitability."

Airbus says it has made money most years since the early 1990s and, assuming it can avoid another price war, will continue to do so. That helps explain why Forgeard is trying hard to manage expectations about Airbus' current success. Says he: "A 78% market share is too high. With 50% we are very happy. And with 40% we are not unhappy." He is not being modest. Were Airbus to continue its domination, Boeing would cut prices again to regain market share, which would mean lower profits or, more likely, losses for both companies. Half the market is just fine with Airbus. If it could also someday win recognition as the best airplane manufacturer in the world, well, that would be the caramelized sugar on the creme brule.