European plane maker Airbus SAS said yesterday it expected an "extremely difficult" year in 2003, warning it could revise down its jet delivery targets if a sharp market downturn were compounded by economic weakness and a war in Iraq.

As Airbus unveiled figures showing it had gained market share on US arch-rival Boeing Co. in 2002, Chief Executive Noel Forgeard offered up some of his most cautious comments to date on the state of the global airline market.

Weakening economic conditions and the September 2001 attacks in the United States have forced Boeing to cut its own jet delivery targets sharply and lay off tens of thousands of workers.

But Airbus, which is 80 per cent owned by European aerospace group and 20 per cent owned by Britain's BAE Systems, has trimmed its own output only slightly and remained comparatively optimistic about prospects until now.

"Frankly I think 2003 will be an extremely difficult year," Forgeard told a news conference.

"We should be able to deliver 300 planes if - and this is a big if - the situation remains stable. Any worsening of economic conditions could lead us to revise down our forecasts," he added.

EADS stock, which is up 19 per cent from an all-time low of E8.7 seen last October, fell on the comments. At 1505 GMT it was trading down three per cent at €10.4 in Paris.

"Forgeard is definitely sounding more cautious," said Nick Cunningham, aerospace analyst at Schroder Salomon Smith Barney in London. "Even excluding the impact of a war in Iraq, it looks to us like the market is going to get a lot worse before it gets better."

The bleak outlook contrasted with what by many measures was a strong 2002 for Airbus.

Thanks to a huge 120-plane order from British no-frills carrier EasyJet Plc in late December, Airbus won more new orders than Boeing in 2002, announcing gross orders for 300 new planes against Boeing's 251.

Airbus had 67 order cancellations last year, bringing its net order intake to 233 aircraft worth $18.4 billion. That compares with net orders of 176 for Boeing.

The Toulouse-based firm said it delivered 303 jets worth an estimated €19.5 billion last year.

That represents a decline from the record 325 posted by Airbus in 2001, but the decrease is smaller than the 28 per cent fall seen by Boeing, which delivered 381 jets in 2002.

It also defies the predictions of many analysts who expressed doubts in January of last year when the company said it could keep deliveries at the 300 mark in 2002.

If all goes according to plan, Airbus will deliver slightly more planes than Boeing this year for the first time in their history, with the Toulouse-based manufacturer aiming for 300 jets to roll off production lines and Boeing forecasting 275 to 285 planes.

The market share gains have been accompanied by key moral victories over the past year. Recently Boeing decided to scrap plans to build its high-speed Sonic Cruiser, the futuristic plane it touted for more than a year as its answer to the Airbus A380 superjumbo.

Airbus began work on the A380 last year and plans to begin delivering the world's largest airliner to customers in 2006.

In addition to Malaysia Airline System, which pledged to buy six A380s last week, Airbus Chief Commercial Officer John Leahy said he was in talks with two other Asian airlines that were interested in the plane.

However, his optimism was tempered by the bleak outlook for the market as a whole, which Leahy said was being compounded by uncertainty over Iraq.

"The problem is if this keeps dragging on for months and months," Leahy told Reuters, referring to Iraq. "The uncertainty is what is preventing companies from taking decisions on capital investment."

Forgeard said Airbus, which unlike Boeing has avoided outright firings, could be forced to cut staff if conditions worsened.

He also expressed "serious concern" about a recent weakening of the dollar, a development which hurts Airbus because its sales are conducted in dollars and then converted into euros in its accounts.

Forgeard said the dollar effect could be balanced out in the years ahead if Airbus succeeds in convincing some airlines to pay for their planes in euros.

"I am confident that in five years time a significant proportion of our contracts will be in euros," he said.