Japan Airlines Orders 31 Airbus Planes in 95 Billion Deal

Japan Airlines Orders 31 Airbus Planes in $9.5 Billion Deal

Oct. 7, 2013
"Just being in Japan wasn't enough," Airbus chief executive Fabrice Bregier said.

TOKYO - Airbus (IW 1000/52) on Monday announced a $9.5 billion deal with Japan Airlines, its first jet order from the carrier, challenging Boeing's (IW 500/14) dominance in the Japanese market as it struggles with the troubled Dreamliner.

The airline said it was ordering 31 planes -- 18 long-haul A350-900s and 13 A350-1000s -- with an option to buy another 25 aircraft.

The new planes are to come into service from 2019 as Japan Airlines (JAL) replaces its aging Boeing fleet, in a blow for the U.S. plane manufacturer.

Airbus chief executive Fabrice Bregier called the deal a "breakthrough" after the firm redoubled its efforts to penetrate a market long dominated by Boeing -- Airbus has a 13% share of the Japanese market.

"Just being in Japan wasn't enough," Bregier said.

"We had to build and strengthen trust, prove that Airbus was a leading player, a world leader that has mastered its technology."

The push by the European plane maker comes as JAL and domestic rival All Nippon Airways (ANA) -- whose fleet is also dominated by Boeing -- have been hit by problems with the Dreamliner.

The lightweight plane -- hailed for its fuel-efficiency but marred by years of production delays -- was grounded globally in January after lithium-ion batteries overheated on two different planes, with one of them catching fire while parked.

Deal Unrelated to Dreamliner Troubles

The Japanese carriers, which are the single biggest operators of the Dreamliner, have put their fleets back into service. But they are seeking compensation from Boeing for a string of problems which forced them to cancel hundreds of flights and dented their bottom line.

Despite a lengthy investigation, Boeing has not identified the root cause of the aircraft's battery problems, but said it put safeguards in place to prevent future incidents.

"Considering the recent troubles with the Dreamliner, JAL may have reached the conclusion that it wants to avoid the risks," said Mitsuru Miyazaki, senior analyst at Tokyo's SMBC Friend Research Center.

"The aviation sector is a global industry so it's natural that Japanese airlines want to secure multiple sourcing options."

However, JAL head Yoshiharu Ueki said the Dreamliner problems were "totally unrelated" to its decision to buy planes from Boeing's chief rival.

The carrier's president pointed to the A350's lightweight materials which help cut down on fuel costs, usually an airline's single-biggest cost -- a feature that Boeing played up with its Dreamliner.

"To put it simply, Airbus's A350 matched our expectations," Ueki said.

The value of the JAL-Airbus agreement is based on the planes' list prices, but airlines typically extract price cuts on big orders.

Push Into Asia-Pacific Aviation Market

For Airbus, the deal marks a further push into the all-important Asia-Pacific aviation market, which it has predicted would overtake Europe and North America in air traffic by 2032.

Asian airlines have been on a buying spree. Three Chinese companies ordered 68 medium-range A320 aircraft in September, while Air China ordered 100 A320s in May for about $8.8 billion.

Monday's announcement comes as JAL embarks on a route expansion after it rose from the ashes of bankruptcy last year to re-list on the Tokyo stock exchange. That followed an $8.5 billion initial public offering, one of the biggest share sales in 2012.

JAL posted strong earnings after its re-listing, making it the most profitable airline in the world.

But a government bailout to save the carrier after it went bankrupt in 2010 has led to acrimony between Japan's biggest airlines, with ANA routinely criticizing its rival's rescue package.

On Friday, JAL said it had lodged a complaint over Tokyo awarding twice as many lucrative landing slots at Haneda airport to ANA in an apparent attempt to level the playing field after the bailout.

Shingo Ito, AFP

Copyright Agence France-Presse, 2013

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