Boeing announced on Tuesday that they are going to move forward with their 7E7 Dreamliner program. The announcement is not a big surprise, but the news sets the stage for an interesting battle between Boeing and Airbus.

Airbus made the first move almost two and a half years ago by deciding to build a double decker superjumbo. The A380 will be capable of carrying up to 550 people, 40% more than Boeing’s 747-400. This creates a 40% drop in the cost of passenger-miles. The premise for their strategy is that the number of landing slots at most major airports is not going keep pace with the growth in air travel. Their answer: Bigger Planes. Congestion in the LaGuirda-JFK-Newark Corridor illustrates the point vividly.

Constrast that with Boeing’s approach to the market. The 7E7 will carry 200 to 250 passengers, but will be super-efficient and consume 20% less fuel. The plane will use composites and advanced electronics to create the increased efficiencies. Boeing is betting this next platform on strength of the mid-sized market. With the success of the Southwest’s point to point model, I can also see strong logic for this type of aircraft.

Airbus gained a considerable advantage when they put their stake in the ground and said they were going big. Boeing was put on the defensive. They looked at making a superjumbo, but felt the demand wasn’t there. I give Boeing credit for taking a different path and pushing technology in a different direction. I think it plays well with their continued expansion into military and space vehicles.

All that is left is for the market to decide. The results of this one will make a great cover story for Fortune.