June 18, 2007

Airbus Wins Qatar, US Airways Commitments to New A350

Airbus SAS won $40.7 billion in contracts at the Paris Air Show, with deals from Qatar Airways, US Airways Group Inc. and a leasing company for the new A350 after the European planemaker fell behind Boeing Co. in orders in 2006 for the first time in five years.

Qatar's $17 billion order includes 80 A350s and three double-decker A380s, Airbus Chief Executive Officer Louis Gallois said on the show's opening day. US Airways plans to buy 92 jets worth $10 billion, including 22 A350s, 60 of the A320 single-aisle planes and 10 A330s. Kuwait's Aviation Lease & Finance bought 12 A350s and seven A320s for $2.9 billion.

Airbus squandered its position as the dominant planemaker with its bet on the 555-seat A380 superjumbo, which is two years behind schedule and will cut profit at parent European Aerospace & Defence Co. by 4.8 billion euros ($6.4 billion) through 2010. Airbus needs 100 firm orders for the A350 at the show to demonstrate it's making a comeback, said Richard Aboulafia, vice president of Teal Group, a Fairfax, Virginia-based aircraft consulting firm. It's won 92 so far.

``Airbus has avoided defeat,'' said Aboulafia after today's announcements. ``This could have been a devastating week if they hadn't shown some firmness to the order numbers. But for a real counterattack, they need blue-chip endorsement like Emirates or ILFC.''

Shares of EADS fell as much as 32 cents, or 1.3 percent, to 23.96 euros and were down 1.3 percent at 4:51 p.m. in Paris. The stock has fallen 8.1 percent this year, compared with a 9.9 percent gain for Boeing.

Boeing Orders

On the first day of the show, Boeing reported contracts worth $4.4 billion, including an order from Indonesia's PT Lion Mentari Airlines for 40 737s and a contract to sell six 777 freighters to General Electric Co.'s GECAS plane-leasing arm. Both had been announced as orders from unidentified customers.

The A350 deals are a boost for Airbus in the most lucrative segment of the $60 billion-a-year commercial aircraft market, medium-sized long-range jets. Boeing has sewn up 584 orders for its 787 Dreamliner, which enters service in 2008. Airbus had 13 orders for the A350 before the start of the show. Gallois expects to have 200 firm orders for the A350 XWB by yearend. The US Airways order is not yet firm.

"It's a good start and a show of support for the launch, but they have an extremely long way to go both in time and orders to catch up with the 787," said Jon Kutler, head of Los Angeles-based investment firm Admiralty Partners Inc. "Everybody's going out of their way, especially the traditional Airbus customers, to make sure the A350 is successful. Will it be as successful as the 787? Unlikely."

Qatar Orders

The Qatar A350s are worth $16 billion at catalog prices. The three superjumbos take the total order value to $17 billion at list prices.

Airbus also won a commitment today from Emirates, the largest Mideast airline, to buy eight A380s valued at $2.55 billion. A final purchase would take Emirates' total order for the double-decker plane to 55.

Emirates expects the A380 to bring fuel savings of between 15 percent and 18 percent compared with a Boeing 777-300, President Tim Clark said.

The carrier also plans to buy 100 mid-sized, long-range planes and will choose between the A350 and Boeing's rival 787 "in the next few months," Chairman Sheikh Ahmed bin Saeed al- Maktoum said.

A350 Specifications

The so-far unfinished specifications of the A350 were not a concern because Qatar had been an "instrumental" Airbus customer in shaping the new plane, Chief Executive Officer Akbar al-Baker said at a press conference. "The aircraft definition is very tailor-made for Qatar Airways."

By Andrea Rothman and Laurence Frost
To contact the reporters on this story: Andrea Rothman in Paris at aerothman@bloomberg.net
The full of this article's can be read on the source at: Bloomberg.com

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