Japan Airlines in Airbus $9-B order


TOKYO: Airbus on Monday announced a $9.5-billion deal with Japan Airlines, its first jet order from the carrier that challenges rival Boeing’s dominance in the Japanese market as it struggles with the troubled Dreamliner.

The airline said that it was ordering 31 planes—18 long-haul A350-900s and 13 A350-1000s—with an option to buy another 25 aircraft.

The new planes are to come into service from 2019 as Japan Airlines (JAL) replaces its ageing Boeing fleet, in a blow for the US plane manufacturer.

“Airbus and Japan Airlines are opening a new chapter in our relationship,” Airbus Chief Executive Fabrice Bregier told reporters in Tokyo, adding that the order was the France-based company’s biggest so far this year.

“Japan is a very important market,” he added.

Investors cheered reports of the purchase earlier Monday with JAL’s Tokyo-listed shares closing 3.01 percent higher at 5,810 yen. The deal was announced after markets closed.

The push by the European plane maker comes as JAL and domestic rival All Nippon Airways (ANA)—whose fleet is also dominated by Boeing—have been sideswiped by problems with the Dreamliner.

Dreamliner problems
The lightweight plane—hailed for its fuel-efficiency but marred by years of production delays—was grounded globally in January after lithium-ion batteries overheated on two different planes, with one of them catching fire while parked.

The Japanese carriers, which are the single biggest operators of the Dreamliner, have put their fleets back into service. But they are seeking compensation from Boeing for a string of problems which forced them to cancel hundreds of flights and dented their bottom line.

Despite a lengthy investigation, Boeing has not identified the root cause of the aircraft’s battery problems, but said that it put safeguards in place to prevent future incidents.

“Considering the recent troubles with the Dreamliner, JAL may have reached the conclusion that it wants to avoid the risks,” said Mitsuru Miyazaki, senior analyst at Tokyo’s SMBC Friend Research Center.

“The aviation sector is a global industry so it’s natural that Japanese airlines want to secure multiple sourcing options,” the analyst added.

However, JAL head Yoshiharu Ueki said that its high-profile Dreamliner problems were “totally unrelated” to its decision to buy planes from Boeing’s chief rival.

The carrier’s president pointed to the A350’s light-weight materials which help cut down on fuel costs, usually an airline’s single-biggest cost—a feature that Boeing played up with its Dreamliner.

“To put it simply, Airbus’s A350 matched our expectations,” Ueki said.

The value of the JAL-Airbus agreement is based on the planes’ list prices, but airlines typically extract price concessions on big orders.

For Airbus, the deal marks a further push into the all-important Asia-Pacific aviation market, which it has predicted would overtake Europe and North America in air traffic by 2032.

Asian airlines have been on a buying spree. Three Chinese companies ordered 68 medium-range A320 aircraft in September, while Air China ordered 100 A320s in May for about $8.8 billion.

Monday’s announcement comes as JAL embarks on a route expansion after it rose from the ashes of bankruptcy last year to re-list on the Tokyo stock exchange. That followed an $8.5-billion initial public offering, one of the biggest share sales in 2012.

JAL posted strong earnings after its relisting, making it the most profitable airline in the world.

But a government bailout to save the carrier after it went bankrupt in 2010 has led to acrimony between Japan’s biggest airlines, with ANA routinely criticizing its rival’s rescue package.

On Friday, JAL said that it had lodged a complaint over Tokyo awarding twice as many lucrative landing slots at a major airport to ANA, in an apparent attempt to level the playing field after the bailout.

Last week, the government said that ANA would get 11 of 20 new international take-off and landing slots at Haneda airport, the world’s fourth-busiest hub.

JAL got just five with the remaining four slots to be distributed in the future.



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