Airshow: Jetliner Makers Fatten Their Order Books
By Jon Ostrower, David Pearson, The Wall Street Journal | Jul. 11, 2012
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The world's biggest passenger-jet makers Tuesday confirmed new orders at the Farnborough International Air Show valued at up to US$14 billion at list prices, which the plane makers all can claim as modest improvements in their market positions.
The orders for jetliners manufactured by Canada's Bombardier Inc. and bigger rivals Boeing Co. and Airbus, a unit of European Aeronautic Defence & Space Co., underscore the robust health of the commercial aerospace sector, as airlines rush to renew and expand fleets with more fuel-efficient aircraft. It contrasts with the less-dynamic defense industry as many developed world governments look to reduce military spending to stabilize public finances.
Bombardier confirmed an order from Latvian flag carrier Air Baltic Corp. for up to 20 CSeries jets, representing an important breakthrough in the European market as the midsize European carrier looks to replace its fleet of aging Boeing 737 Classic jetliners from 2015.The airplane maker signed a letter of intent for 10 CS300 aircraft with options for an additional 10. The order, at list price, is worth US$764 million and could rise to US$1.57 billion if Air Baltic exercises its options.
The list price for aircraft is only indicative of the value of an order because all manufacturers offer significant discounts to customers, ranging from 25% to more than 60% of the catalog price.
Martin Gauss, chief executive of Air Baltic, said the pre-delivery payments for the aircraft will be paid out of the company's cash reserves and additional financing sources have already been arranged.Boeing and General Electric Co. have signed a preliminary commitment for 100 aircraft worth up to US$9.25 billion as GE Capital Aviation Services adds 25 current-generation 737s and 75 updated 737 Max aircraft to its portfolio.
Tuesday's plane orders were also good news for engine makers. General Electric and Safran SA, whose joint venture CFM International will provide the engines, valued GECAS's orders for the 737 Max at US$1.9 billion, while those for the current 737 version are worth US$500 million.
Norman Liu, GECAS's chief executive, said the first 737 Max jets will be delivered in 2018. The agreement confirms a Saturday report by The Wall Street Journal of the company's intent to buy the aircraft.
The GE deal represents another coup for Boeing with aircraft-leasing companies as it seeks to catch up with Airbus, whose A320neo aircraft has taken the major share of the market for re-engined single-aisle jetliners. GECAS joins lessor Air Lease Corp at the show in announcing plans to acquire Boeing's revamped single-aisle plane. At list value, the 737 Max order is worth US$7.1 billion and the current-generation 737 aircraft order is worth US$2.11 billion, Boeing said.
Boeing also got more public backing for its 787 Dreamliner, which has taken part in the air display at this year's air show, marking the group's return to Farnborough for the first time in 28 years.
Deutsche Lufthansa AG said it likes what it sees so far of the aircraft though its next new jetliner order, sure to be for its long-haul routes, won't take place before 2013 at the earliest."The next strategic fleet decision will be in the long-haul segment," said Nico Buchholz, executive vice president of group fleet management. "It is correct that we think the aircraft [the 787-10] is very interesting and Boeing knows this," said Mr. Buchholz.Meanwhile, Airbus notched more orders for its new A350 wide-bodied jetliner, its answer to the 787, which is on display at this year's air show, as Hong Kong-based Cathay Pacific Airways Ltd. said it is ordering 10 new Airbus A350-1000 wide-bodied jets. The carrier said it is also converting 16 of its 36 previous orders for A350-900s into the larger A350-1000 model in a deal worth US$4.2 billion overall based on list prices.
Cathay Pacific is the first airline to order the A350-1000 since Airbus decided one year ago to tweak the design by adding more powerful engines made by Rolls Royce PLC.
Airbus, which Monday said it plans to offer an increased-range version of its wide-bodied A330 airliner in a new attempt to wrest market share away from Boeing's B777-200ER, received public backing for the move by Malaysia Airlines. The airline said it is interested in the jetliner as it decommissions its fleet of older Boeing 747 jumbo jets, a process due for completion this November. Airbus's commercial chief, John Leahy, said he hopes to announce a first order for the enhanced A330 series by the end of this week's air show. Chinese airlines particularly are interested in the improvements, he told a news conference. The longer flying range comes from an increase in the A330s maximum takeoff weight to allow it to carry more fuel or payload.