Airbus beats Boeing to win pounds 6.9bn BA short-haul order
Tuesday 25 August 1998
The order, of up to 200 short-haul aircraft, is a major coup for Airbus, marking the first time the four-nation consortium has won a commission from the UK's biggest airline.
It is also a major blow for Boeing, which until today had been the dominant supplier to BA.
Sources close to the deal said in Paris yesterday that BA was set to lodge an initial order for up to 59 aircraft, worth more than pounds 600m, with options to buy as many as 200. The planes will be used on BA's European short-haul routes from Manchester and Birmingham. The sources said that the contract could be worth up to $11bn (pounds 6.9bn) if all the options were exercised.
The deal will be announced today at Airbus' headquarters in Toulouse, attended by Tony Blair, Prime Minister, who is on holiday near by. He is expected to welcome the deal as a boost for the UK and European defence industry.
BA is understood to have chosen a fleet Airbus A320s over the latest version of Boeing's 737, the biggest-selling airliner, to replace its European short-haul fleet. Airbus - by British Aerospace, France's Aerospatiale, Germany's Dasa and Casa of Spain - and Boeing have been fighting a fierce war over the order since February when BA first announced the competition.
Although the airline invited the two firms to come up with innovative financing ideas to lessen the cost of buying the planes, sources close to the company said that solutions such as leasing were not part of the deal.
Engines for the BA's new A320s are expected to come from the International Air Engines Consortium, which includes Rolls-Royce, and is offering a model known as V2500 - or an alliance of General Electric of the US and Snecma of France, which makes the CFM56.
Airbus is likely to hail its victory in the race to replace BA's European fleet as proof that it is eating into its US arch-rival's market share.
According to recent figures, Boeing is still the leader in the global market for civilian aircraft, but Airbus is catching up fast. Last year Airbus won 45 per cent of new orders, compared with around 30 per cent in recent times.
Separately, speculation was mounting yesterday that Boeing was set to win a BA order for a number of Boeing 777 long-haul aircraft at the expense of existing orders for 747s.
Industry sources said that BA was preparing to cancel the remaining orders for the big 400-seat jumbo seats and switch instead to the smaller 777s, which seats around 300 passengers. BA already operates 18 Boeing 777s and has a further 11 on order.
The sources said that BA's decision to overhaul its fleet was driven by the need to maximise yield (or profit) per passenger and avoid leaving empty seats on planes.
The move follows the lifting of strict regulations on a number of routes, including trips to the US, which will enable airlines to run more frequent flights.
British Aerospace shares rose by 15p to 420p. British Airways were up by 8.5p to 496.5p.
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