The Business Times

Airbus set to sign deal with Delta for 50 planes

Published Thu, Nov 20, 2014 · 10:45 PM

[PARIS] European aerospace giant Airbus is poised to sign a contract to deliver 50 long-haul carriers to US Delta Airlines in a deal worth US$14 billion (S$18.2 billion) at catalogue prices, sources told AFP on Thursday.

Under the terms of the deal, Airbus will deliver 25 A350-900s, the company's new long-haul carrier that this month received certification from the US Federal Aviation Authority and is due to enter service by the end of the year, a source close to the negotiations said on condition of anonymity.

The other 25 planes will be A330-neos, an updated version of its wide-body medium-haul jet with fuel saving engines which is slated to enter into service at the end of 2017.

"The order should be finalised in the coming days," said one of the sources. "The announcement could be made at the beginning of next week." Airbus confirmed the order in a statement.

"Airbus is unique in offering an optimised long-range choice in aircraft that will allow Delta to continue to modernise its fleet," Airbus Chief Operating Officer John Leahy was quoted as saying.

Delta had asked Airbus and Boeing in April to submit offers as the airline considers replacing its ageing fleet of long-haul 747-400 and 767-300 jets, saying it expected to place an order by the end of the year.

The A350-900 is designed to compete with Boeing 777 and 787 jets in the lucrative long-haul segment and has already received 750 orders.

Equipped with Trent XWB engines from Rolls-Royce, the plane can transport 315 passengers up to 14,500km.

Delta already has a sizable fleet of Airbus aircraft, with 126 single-aisle medium-haul A320s and 32 A330s. It has recently made orders for another 55 Airbus planes.

Aerospace analyst Christophe Menard said that Airbus likely benefitted from the fact that it could deliver A350s rather quickly after Emirates cancelled in June an order for 70 of the aircraft.

"Boeing, on the contrary, doesn't have quick slots available for its 787," he said.

Westhouse Securities said in a note to investors that the order indicates that the delivery date is becoming a crucial factor for airlines.

The likely order "demonstrates that scarcity of delivery positions for some aircraft is becoming a deal-losing issue - recall that Airbus and Boeing combined have 8.6 years of backlog...", said Westhouse Securities.

Airlines are in a major push to modernise their fleets to reap the fuel savings that the latest generation of engines offer, especially as competition in the sector is fierce and fuel is one of biggest costs.

As Airbus and Rolls-Royce still have relatively low market share with the older, or so-called legacy US airlines, "this is an important win - particularly as the US legacies have old fleets and thus big future replacement demand," said Westhouse Securities.

Delta's fleet is on average 17 years old.

Menard noted Delta was one of the airlines which had been encouraging Airbus to offer a version of the A330 with new engines.

"This order would therefore be logical," he said.

Earlier Airbus announced that it had signed a preliminary deal to supply the China Aircraft Leasing Company with 100 planes in a contract worth around US$10.2 billion (8.1 billion euros) at catalogue prices.

The orders will help Airbus narrow Boeing's lead in new orders for this year as the US manufacturer has not announced any major new contracts this month.

At the end of October Boeing had 1,046 net new aircraft orders for this year against 794 for Airbus.

Shares in Airbus Group initially rose on the news, but were later pulled down along with the wider French market as survey data showed business activity continues to contract.

In Thursday trading Airbus Group shares were down 0.30 per cent to 46.86 euros while the CAC 40 index had given up 0.75 per cent to 4,234.21 points.


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