Wednesday, November 15, 2017

Airbus, Boeing Land More Than $75 Billion in Plane Orders: Deals for single-aisle planes disclosed at Dubai Airshow come amid growth in low-cost airlines



The Wall Street Journal 
By Doug Cameron and  Robert Wall
Updated Nov. 15, 2017 2:40 p.m. ET

Airbus SE and Boeing Co. landed aircraft deals with a headline value of more than $75 billion, demonstrating unrelenting appetite for their most popular planes from discount carriers looking to lock in deals to support growth for years to come.

Airbus on Wednesday disclosed one of the biggest aircraft commitments on record with a 430-jet agreement with airlines linked to Indigo Partners LLC, a U.S. private-equity group with stakes in some of the fastest-growing low-cost carriers on three continents.

The proposed deal announced at the Dubai Airshow would more than triple the size of Denver-based Frontier Airlines and fuel the rapid expansion of carriers in Hungary, Mexico and Chile. It is a rare example of carriers clubbing together to secure better prices.

The jets carry a sticker price of almost $49.5 billion before the customary discounts that can reduce the true value by 50% or more, and helps Airbus narrow the gap with Boeing in new orders this year and adds to backlogs at the European manufacturer representing five years or more of production.

Boeing followed shortly after with a deal to sell budget carrier Flydubai as many as 225 of its 737 Max planes, including the newest and largest version, the Max 10. The deal encompasses 175 firm commitments and purchase rights for more, Boeing said, with a combined list price of $27 billion.

Airbus and Boeing are pushing production of single-aisle planes to satisfy demand, with executives at both manufacturers in recent months saying they could build more planes. Demand is there, they say, though there are concerns suppliers may struggle to keep pace with the torrid pace of production.

Boeing recently raised annual production of the 737 to 564 aircraft and plans to boost the rate by another 60 in each of the next two years. Airbus aims to increase annual output of its A320 planes to 690 in 2019–and has considered going as high as 725.

Even with higher production, new customers will have to wait. The four Indigo-linked carriers’ deliveries stretch from 2021 to 2026, with Flydubai’s running until 2029

Phoenix-based Indigo, which is led by industry veteran Bill Franke, is best known for helping launch Spirit Airlines before selling out to acquire Frontier, as well as Hungary’s Wizz Air Holdings PLC and Mexico’s Volaris Aviation Holding Co. It also backed JetSmart, a Chilean carrier that launched this year.

The preliminary agreement with Airbus covers 430 planes—273 A320neos and 157 of the larger A321neo model—doubling potential orders placed for the four Indigo-linked airlines.

Frontier plans to take 134 jets, with Wizz receiving 146 planes pending shareholder backing. Volaris would receive 80, with 70 for JetSmart.

It is not unprecedented for airlines to order aircraft jointly. Emirates Airline and Qatar Airways cooperated as launch customers for the Boeing 777X at the 2013 Dubai Airshow. Abu Dhabi-based Etihad Airways also combined an order for Boeing 787 Dreamliners with one from now defunct Air Berlin , in which it held a minority stake.

Budget airlines tend to place massive plane orders at once to get bigger discounts from plane makers. The big commitments allow the manufacturers to lower costs by building planes more efficiently and extracting discounts from their own suppliers.

For Airbus, the deal is a bit of good news amid several headwinds. Regulators in the U.S. and Europe are scrutinizing sales by the European company for alleged wrongdoing. Airbus said it had alerted regulators to the possible ethical missteps by middlemen was cooperating with the investigations.

Emirates Airline, the world’s largest by international traffic, on Sunday snubbed the plane maker on a roughly $15 billion A380 superjumbo order, refusing to finalize the deal unless Airbus promised to build the plane for at least another decade.

The European manufacturer has trailed Boeing in securing new orders this year, garnering more than 300 before Wednesday’s announcement, compared with more than 600 for its U.S. rival. Airbus officials hope to finalize the deals by the end of the year.

The Dubai Airshow can be a hotbed for plane deals. Four years ago, Boeing snagged a $76 billion deal from Emirates Airline for the 777X. The carrier at the same event ordered 50 A380 superjumbos valued at around $22 billion at today’s list price. A decade ago, Dubai Aerospace Enterprise drew attention with a 200-plane deal split equally between Airbus and Boeing for different plane models. DAE was forced to cancel the $27 billion in plane orders—considered massive at the time—when the jet-leasing firm ran into financial trouble.

However, analysts are cautious on whether some of the big customers will take all of their planned jets on schedule, particularly if an economic downturn slows traffic growth.

Gus Kelly, chief executive of aircraft lessor AerCap Holdings NV, said this week that placing aircraft orders often represents a career highlight for some airline CEOs. Speaking at an investor conference, Mr. Kelly said some of these orders had served only to benefit the shareholders of Airbus and Boeing.

Original article can be found here ➤ https://www.wsj.com




The Wall Street Journal
By Doug Cameron
Updated Nov. 15, 2017 4:35 a.m. ET

Airbus SE and Boeing Co. secured more than $75 billion in single-aisle plane commitments Wednesday, demonstrating unrelenting appetite for their most popular planes from discount carriers as the airlines lock in deals to support growth for years to come.

Airbus secured what it called one of the biggest aircraft deals in its history with a 430-jet agreement with airlines linked to Indigo Partners LLC, a U.S. private-equity group with stakes in some of the fastest-growing low-cost carriers on three continents.

The proposed deal, announced Wednesday at the Dubai Airshow, carried a sticker price of almost $49.5 billion before the customary discounts that can reduce the true value by 50% or more, though consolidation in the airline and finance industries is giving buyers more clout.

Boeing followed shortly after with a deal to sell Dubai-based Flydubai up to 225 more of its 737 Max 8 planes at a list price value of $27 billion. The deal is for 175 firm commitments with purchase rights for more, Boeing said.

Airbus and Boeing are aggressively boosting production of these single-aisle planes to satisfy demand. Executives at both manufacturers in recent months have said they could build more planes. Demand is there, they say, though there are concerns suppliers may struggle to keep pace with the torrid pace of production.

Airbus said the Indigo Partners deal tops one by other budget airlines AirAsia and India’s unrelated IndiGo, making the financial investor its biggest customer by list price.

Indigo, based in Phoenix, is led by industry veteran Bill Franke, who has invested in a number of carriers including holdings in Frontier Airlines in the U.S., Hungary’s Wizz Air Holdings PLC and Mexico’s Volaris. It also backed JetSmart, a new Chile-based carrier that launched this year.

The preliminary agreement covers 430 planes—73 A320neos and 157 of the larger A321neo model—doubling the potential orders from the four Indigo-linked airlines.

Denver-based Frontier plans to take 134 jets, with Budapest-based Wizz receiving 146 planes. Volaris would receive 80, with 70 for startup JetSmart.

The European manufacturer has trailed rival Boeing Co. in securing new orders this year, garnering more than 300 before Wednesday’s announcement, compared with more than 600 for its U.S. rival.

It is unusual for airlines to order aircraft jointly, though Dubai’s Emirates Airline and Qatar Airways cooperated as launch customers for the Boeing 777X at the 2013 Dubai Airshow.

Indigo didn’t disclose when first deliveries were due to start, or what engines they would choose. The Pratt & Whitney unit of United Technologies Corp. and a joint venture between General Electric Co. and Safran SA offer rival engines.

Airbus and Boeing both have backlogs for their single-aisle jets stretching five or more years, even though both are boosting output.

Deals of this scale have become more commonplace in recent years, in part because of the explosive growth of low-cost carriers.

However, analysts are cautious on whether some of the big customers will take all of their planned jets on schedule, particularly if an economic downturn slows traffic growth. Plane makers can boost profits by agreeing to defer aircraft deliveries.

Gus Kelly, chief executive of aircraft lessor AerCap Holdings NV, this week said placing aircraft orders often represents a career highlight for some airline CEOs. Speaking at an investor conference, Mr. Kelly said that some of these orders had served only to benefit the shareholders of Airbus and Boeing.

Original article can be found here ➤ https://www.wsj.com

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