Tuesday, June 17, 2003

Airbus wins Emirates order


Deal for 41 jets puts firm one-up on Boeing

Enquirer wire and staff reports

Airbus SAS Monday won an order for 41 planes from Emirates, the Middle East's fastest-growing airline, giving the European company a boost in passing Boeing Co. this year as the world's biggest plane maker.

The order, valued at $12.5 billion, is the single largest ever for wide-body aircraft, both in numbers and dollar value.

The purchase includes 21 double-decker A380 airliners and 20 A340s, Airbus Chief Executive Officer Noel Forgeard said at the Paris Air Show.

Including earlier deals, Dubai-based Emirates has ordered 43 A380s - by far the largest of any airline customer - and expects to lease two more. The double-decker jet is to enter service by 2006.

But there was no word on whether a GE Aircraft Engines partnership with Pratt & Whitney or Rolls Royce would produce the engines for the double-decker jets ordered Monday.

In February 2002, Emirates placed a $1.5 billion order with the GEAE/P&W partners for about 100 engines to power 22 A380 passenger jets and two freighters along with options for 10 more engines.

With the announcement, Emirates offered new hope for a downtrodden industry following the Sept. 11 attacks, wars in Afghanistan and Iraq, the SARS virus outbreak and global economic malaise.

Airbus, based in Toulouse, France, expects to beat Chicago- based Boeing this year in aircraft production for the first time and to gain market share by winning more orders. The 555-seat A380 will be the world's biggest passenger jet when it enters service in 2006, surpassing Boeing's 747, which seats 420.

"This will be our big order of the show," John Leahy, head of Airbus' commercial aircraft division, said on the sidelines of a news conference at the eight-day event.

"I always expected Airbus to win more orders than its largest competitor both this year and next," said Klaus Breil, who helps oversee about $5.9 billion at Adig Investments in Frankfurt, including 1 million shares in Airbus's 80 percent owner European Aeronautic, Defense & Space Co.

Forgeard expects Airbus to win orders for about 250 planes this year, 40 percent more than he predicted in January, as it takes business from Boeing. Airbus has now won orders for 197 new planes this year, compared with 40 for Boeing. Airbus also plans to deliver 300 planes this year, compared with Boeing's 280.

The order for A380s "leaves Boeing looking rather foolish," said Sandy Morris, an analyst at ABN Amro in London. "Over the last few years, Boeing has been saying that there's not a market for a large plane such as the A380. The order also shows extraordinary ambitions on Emirates' behalf."

Airbus now has orders for 116 A380s and said it expects Chinese carriers to be in demand for the superjumbo jet.

As its European rival basked in its record-setting order, Boeing laid out its vision for retaking the lead in the fiercely competitive aviation industry: the newly christened 7E7 Dreamliner. Boeing executives predicted the fuel-efficient 200-seat jet is what customers will really want once the aviation gloom lifts.

Randy Basler, vice president of Boeing's commercial aviation arm, said that the Airbus A380 goes against the growth pattern of air travel, which he argued was moving in the direction of smaller point-to-point flights. He estimated that there was only a market for 320 planes the size of the A380 over the next two decades, accounting for 11 percent of the total aircraft market.

For the past two years, Boeing had tried in vain to find customers for the Sonic Cruiser, which would have flown at near supersonic speeds, after deciding not to build a direct competitor to the A380.

Dreamliner

The U.S. plane maker has marketed the twin-aisle Dreamliner plane to 40 airlines, and expects to begin production by the end of 2004 and start delivery in 2008. It aims to sell as many as 3,000 over the next 20 years, or as much as 13 percent of all aircraft sold in the period. The plane would seat between 100 and 250 passengers and use 20 percent less fuel per seat than comparable models.

Emirates, owned by the government of Dubai, plans to double the size of its fleet to about 100 planes by the end of the decade to capitalize on the flow of passengers between Europe and East Asia. It serves 64 destinations including London and Melbourne, while this year it plans to add four routes and to begin serving Sydney non-stop with a 17-hour flight.

Dubai, the second-biggest sheikhdom in the seven-member United Arab Emirates, aims to become a transport, commerce and tourism hub for an area stretching from the eastern Mediterranean to South Asia and from Central Asia to East Africa

Biggest Order

Emirates said the Airbus order is worth $12.5 billion, basing the figure on the projected value of the aircraft at delivery rather than list price. Emirates also said it will lease another two A380s and two A340 from International Lease Finance Corp., a unit of American International Group Inc

Emirates also placed a $900 million order with Rolls-Royce Plc, the No. 2 aircraft-engine maker, for Trent 500 engines to power the A340s, Rolls-Royce said.

EADS Chief Executive Philippe Camus said in a broadcast interview with Bloomberg News that the plane maker will announce additional orders during the show.

"Things are going pretty well for us this year," Forgeard told reporters at the show Sunday. "The market is a bit better than we'd expected and our market share is considerably better than we'd forecast."

Boeing said Saturday that carriers are beginning to show more interest in ordering new planes as passenger traffic rebounds. The plane maker expects traffic to recover to 2000 rates by the end of the year, Alan Mulally, head of Boeing's commercial aircraft business, told journalists at the show. Boeing declined to forecast new orders for 2003.

Airlines have been canceling or delaying new plane purchases because of a decline in demand for air travel as a result of the Sept. 11 attacks, the Iraq war, stagnating economic growth and spread of a deadly pneumonia in Asia.

GE gets $1B in deal

The expansion of a Mideast airline is adding $1 billion in business to Evendale-based GE Aircraft Engines.

Emirates Airlines announced Monday it will lease an additional 26 Boeing 777-300ER aircraft - 14 of them from GE Capital Aviation Services (GECAS). To fill that leasing order, GECAS has to order an additional 15 GE90 engines from GE Aircraft Engines.

The engines, which will be produced at the company's Durham, N.C., plant, and a service agreement with Emirates are valued at more than $1 billion.

--Amy Higgins




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