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Boeing, Airbus lands billions in deals

Wednesday, July 11, 2012

FARNBOROUGH, England - Boeing Co and arch-rival Airbus were caught in a fierce dogfight for orders at the Farnborough Airshow yesterday, with both aircraft manufacturers unveiling multi-billion deals — crucial at a time of global economic unease.

Boeing was the big winner for the second day as it clinched a further two big orders worth a little more than US$11 billion ($966 billion) for its remodeled short-haul 737 aircraft. Meanwhile, European rival Airbus unveiled its first billion-dollar order at this year's airshow.

The US manufacturer said GE Capital Aviation Services, the commercial aircraft leasing and financing arm of General Electric, has committed to purchasing 75 737 MAX 8s and 25 Next-Generation 737-800s. The deal is valued at around US$9.2 billion at list prices but customers rarely pay the full amount when ordering big. The deal is not yet firm, meaning that further hurdles and discussions need to be cleared.

"This commitment confirms the value of the 737 MAX in today's competitive marketplace," said Ray Conner, Boeing Commercial Airplanes President and CEO.

In another order from a leasing company — it also struck a US$7.2 billion deal with Air Lease Corp. on Monday — Boeing said Kuwait's ALAFCO has committed to buy 20 737 Max 8s valued at US$1.9 billion at current list prices.

"This is the first commitment for the 737 MAX from the Middle East which is one of the aviation industry's highest growth regions," said Conner.

The deals, if successful, will help the Chicago-based company claw back ground lost to rival Airbus in the short-haul market. At last year's airshow in Paris — the French capital and Farnborough alternate — Airbus stole a big march on Boeing with its remodeled airplane, the A320neo.

In the run-up to the airshow south of London, expectations were high that Boeing would clinch a raft of short-haul deals as it tries to catch up with Airbus in orders for single-aisle aircraft.

It is pushing the MAX model heavily in response. The MAX incorporates new technologies designed to make the aircraft more efficient, reliable and comfortable. So far, Boeing has secured orders and commitments for more than 1,000 of the aircraft. Further orders are expected over the coming days, including from United Airlines.

"With rising fuel costs, the 737 MAX will provide operational cost savings to airlines in addition to being more environmentally-friendly due to its latest quiet engine technology," said Ahmad Alzabin, ALAFCO's chairman and chief executive.

Airbus also announced it is first big deal of the airshow Tuesday. It said Hong Kong-based airline Cathay Pacific has put in a firm order valued at US$4.2 billion for Airbus' long-haul A350-1000.

"The A350-100 will be a game changer in the 350-seat category, offering outstanding payload-range capability and a 25 per cent reduction in fuel burn," said Fabrice Bregier, Airbus President and CEO. "As an all-new design, it will outperform existing aircraft in its size category on every count, as well as any future derivatives of those aircraft."

Cathay will place a new order for 10 aircraft and convert 16 of its existing orders for the A350-900, a previous edition of the long-haul plane, to the larger A350-1000, which is valued at US$320 million each. The deal is subject to Cathay's board passing it through and takes the total number of A350 aircraft ordered by the airline to 46.

John Slosar, Cathay's chief executive said the A350-1000's "improved payload and range will allow us to connect more and more important cities worldwide directly with Hong Kong."

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