EasyJet snubs Boeing and turns to Airbus

Easyjet has spurned the US giant Boeing in favour of Europe's Airbus in a multibillion-pound order for up to 240 new aircraft, in a move that breaks with tradition among no-frills airlines.

The deal, which followed 10 months of wrangling, will see Airbus supply easyJet with 120 A319 aircraft over five years from August 2003 in what is the year's biggest aircraft order. EasyJet, which recently bought its rival Go, has options with price protection on another 120 A319s until 2012.

Although the contract is worth about £4bn at list prices, industry sources say easyJet has secured a discount of 60 per cent, knocking the price of each new aircraft down to $20m (£13m) and the total cost to easyJet to less than £2bn.

Airbus is to provide "extensive support" to help easyJet integrate the new aircraft into its exisiting fleet of Boeing 737s, including training cabin crew and maintaining the planes.

Ray Webster, easyJet's chief executive, said the group's "long-term aim is that Boeing and Airbus will be interchangeable", marking the first time that a low-cost operator has abandoned the logic of sticking to just one type of plane. "We wanted to make sure we didn't believe our own public relations," he added.

But the market reacted warily to the possible risks of operating a dual fleet, marking easyJet shares 5 per cent lower at 264p. They have nearly halved since July amid fears of over-expansion and problems associated with integrating Go.

Stelios Haji-Ioannou, easyJet's founder and outgoing chairman, was adamant that the deal put the company on the best footing going forward. "The difference in price between Boeing and Airbus is so substantial that it should have been an offence to buy Boeing just to satisfy a fad that 'low-cost airlines only fly Boeing'," he said.

He described as "rubbish" claims by Boeing that its offer had represented "the deal of the century".

In retaliation, the US aerospace giant said it had fought aggressively for the contract but ultimately refused to "destroy the value" of its 737s to win easyJet's order. "We will not sell our aircraft at a price that is considerably less than the value of the product," it said.

EasyJet, which completed the deal at 6am yesterday, said the A319 aircraft would shave about 10 per cent off its operating cost base per aircraft.

"The profit and loss impact will be neutral over the next two years. But the benefits start to flow significantly after 2005," Mr Webster said. "If we had had an all Airbus fleet in today, our margins would have improved by 10 per cent, almost doubling last year's margin of 12 per cent."