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BA Divides $8.2 Billion Order Between Boeing, Airbus

Thu, 09/27/2007 - 7:48am
Jane Wardell, AP Business Writer
LONDON (AP) — British Airways PLC divided its largest aircraft order in nine years between rival plane manufacturers Boeing Co. and Airbus on Thursday as the carrier moves to increase capacity on its long-haul routes.
 
The order, worth $8.2 billion (5.8 billion euros) at list prices, is for both the Airbus A380 superjumbo and the Boeing 787 Dreamliner and will help Europe's third-largest airline keep pace with Virgin Atlantic Airways.
 
BA ordered 24 Boeing 787 aircraft and a dozen Airbus A380s, all to be equipped with Rolls-Royce engines. It also placed options for 18 of the Boeing planes and seven A380s.
 
The planes, to replace 34 of the airline's long-haul fleet of Boeing 747-400s and to be delivered between 2010 and 2014, will allow British Airways to expand its capacity by up to 4 percent per year and give it more flexibility in tailoring its future capacity growth.
 
Analysts said the orders were key for BA to keep up with competitors that have more aggressively expanded their long-haul fleets since the Sept. 11 terrorist attacks in the United States.
 
Virgin's passenger total grew 16 percent last year, eight times the growth at BA.
 
BA said that the A380 will be used to provide more capacity for the airline's key high-density markets and to maximize use of scarce landing and departure slots at its Heathrow airport hub. The Boeing 787 will be used to start new routes and increase frequencies in existing markets.
 
BA Chief Executive Willie Walsh also stressed the green credentials of the airline's new purchases, noting they will ''contribute significantly'' to its target of improving fuel efficiency by 25 percent between 2005 and 2025.
 
BA's shares rose 3.7 percent to 382.5 pence ($7.76) after the long-awaited fleet order announcement, which Collins Stewart analyst Andrew Fitchie said reinforced the fact that ''BA looks cheap on every measure.''
 
''The 30 percent discount to its peers reflects a lack of confidence in the outlook, driven by worries over the knock-on effect of the credit crisis to premium demand,'' he said. ''We are optimistic that next week's September traffic stats release will show a good trading performance and we understand forward bookings and premium demand remain strong.''
 
The orders are also a win for both Boeing and Airbus, with the value of the total order being split roughly evenly.
Boeing has been more successful at attracting customers for its 787 as Airbus experienced problems with both its double-decker flagship A380 and its mid-range A350, its rival to the 787.
 
Wiring and other technical problems delayed delivery of the A380 by two years — Singapore Airlines will fly the first plane next month — and analysts have questioned its decision to focus on the superjumbo.
 
At the same time, unhappy customers forced an expensive redesign of the mid-range A350, which was renamed the A350XWB, delaying its launch to 2013.
 
In contrast, Boeing has hundreds more orders for the 787, which is sold out through to the end of 2013.
 
However, Louis Gallois, chief executive of Airbus parent European Aeronautic Defense & Space Co. NV, said that the BA contract ''is a formidable springboard to demonstrate the quality of the A380.''
 
EADS shares gained 1 percent to 21.30 euros ($30.10) in Paris.
 
Asked about the possibility of possible purchases of the A350, Gallois said: ''I hope it will be possible, but it's up to BA.''
 
Marlin Dailey, Boeing's vice president of sales for Europe, Russia and Central Asia, said that the ''superior efficiency and economics of the 787'' — the world's first large commercial airplane made mostly of carbon-fiber composites — would directly contribute to BA's financial objectives.
 
AP Business Writer Emma Vandore in Paris contributed to this report.
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