March 15, 2007

US Airways to decide on 60-jet order next month

US Airways Group, restarting a push to retire its oldest jets, will order 60 aircraft valued at almost $5 billion by the end of April.

The airline is evaluating proposals from Boeing and Airbus for narrow-body, single-aisle planes, Chief Financial Officer Derek Kerr said in an interview. Tempe, Arizona-based US Airways also will decide by April 30 on the future of a pending 2005 order for 20 Airbus A350 wide-body jets, Kerr said.

Newer jets would save money on maintenance and fuel. US Airways, the seventh-largest U.S. airline, suspended talks with planemakers in November to pursue a hostile bid for Delta Air Lines, and resumed after dropping the offer Jan. 31.

"US Airways is the only legacy carrier out there that's really talking about aggressive expansion," said Richard Aboulafia, vice president of Teal Group, a Fairfax, Virginia- based consulting firm. "There's a certain optimism linked to this kind of order."

For its narrow-body jets, US Airways will chose between members of the Boeing 737 and Airbus A320 families, Kerr said. The airline hopes to replace 55 737-300s with the new planes between 2008 and 2010.

For longer-range aircraft, US Airways will choose between Boeing's 787 Dreamliner and the Airbus A350, Kerr said. The airline ordered 20 A350s, valued at $3.2 billion, in November 2005 in exchange for a $250 million loan that helped finance the merger of US Airways and America West Holdings Corp.

A350 Delays

Airbus, based in Toulouse, France, has said it expects the A350 to be ready in —, five years after Boeing's 787, and has only 100 orders for the plane.

"The A350 today is not the plane we ordered," Kerr said, referring to delays and redesigns since 2005. "We need to know what the plane is going to cost and when it will be ready."

The delays have reached the point that US Airways has the right under its contract to cancel the earlier order, Kerr said.

"US Airways thinking about Boeing is a reflection of the softness in the A350 development program," Aboulafia said. "They need to have confidence about when the equipment is going to be coming, or they're going to have to go with the other guy."

US Airways must make a decision on the 787 soon or risk losing slots in Boeing's production line.

"We have delivery positions they have promised to us for now," Kerr said. "If we don't make a decision soon, they will give those to someone else."

The jets would replace at least some of the carrier's nine Airbus A330s, 10 Boeing 767s or 43 Boeing 757-200s.

List Prices

Airbus planes in the A320 family carry list prices of $52.8 million to $81.6 million, and an order for 60 would be valued at as much as $4.9 billion.

Newer 737 models, including the 737-700 and 737-800 series, list for $54 million to $80.5 million, giving a 60-plane order a potential value of $4.83 billion. Airlines usually receive discounts on list prices.

Shares of US Airways fell $2.42, or 5.1 percent, to $45.02 at 2:15 p.m. in New York Stock Exchange composite trading. It was their biggest drop since Jan. 24. Shares of most other U.S. airlines also declined as the price of jet fuel for immediate delivery in New York Harbor rose as much as 1.9 percent.

US Airways has held talks to buy or lease planes from Air Canada parent ACE Aviation Holdings Inc. to quickly acquire jets capable of flying nonstop between Philadelphia and Shanghai. The airline wants to start that route in 2008 if approved by the U.S. Department of Transportation, and lacks planes with enough range for the 7,400-mile trip.

China Route

"If we get the China route, we'll need to get aircraft for that," Kerr said. "There are aircraft out there we can get."

US Airways has 356 aircraft in its main fleet: 205 Airbus jets, 148 Boeings and three Embraer E190s. The airline's twin- engine 737s date to the late 1980s and are its oldest aircraft, according to Airclaims, an industry database.

The carrier has 37 firm orders for Airbus planes to be delivered in 2008 through 2010. US Airways also has firm orders for 22 Embraer E190 100-seat jets to be delivered this year through 2012. It holds options to add to both orders.

— With reporting by Eric Torbenson in Dallas. Editor: Dufner (psy)

To contact the reporter on this story: Mary Schlangenstein in Dallas at +1-214-954-9451 or

To contact the editor responsible for this story: Dave Versical at +1-248-827-2944 or

Copyright © 2007 The Seattle Times Company

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