JAL makes first purchase from Airbus, not Boeing

By Yuri Kageyama

Associated Press

Published: Monday, Oct. 7 2013 7:31 a.m. MDT

Airbus Japan Chief Executive Fabrice Bregier, center left, and Japan Airlines President Yoshiharu Ueki, center right, hold a model plane of Airbus A350 for photos following their press conference in Tokyo, Monday, Oct. 7, 2013.

Junji Kurokawa, Associated Press

TOKYO — Airbus secured its first-ever order from Japan Airlines on Monday, in a deal that undermines Boeing's long-held dominance of Japan's aviation market.

Japan Airlines is to buy 31 A350 planes from the European aircraft manufacturer. The purchase has a list value of 950 billion yen ($9.5 billion) and marks a big change in policy as Boeing had been JAL's major supplier for decades. JAL also has an option to buy 25 more Airbus planes.

No official price was given, but airlines usually get discounts on the list price when making big orders. Some analysts even think that JAL may be getting the planes at below cost as Airbus looks to make inroads in a part of the world that has been primarily Boeing's domain for decades. Since the end of World War II, the U.S. and Japan have been big trading partners.

Amid much fanfare, Airbus Chief Executive and President Fabrice Bregier and Japan Airlines President Yoshiharu Ueki signed the deal in Tokyo in Monday. Ueki said the decision to turn to the Toulouse, France-based manufacturer for the replacement of its retiring Boeing 777 jets is unrelated to the problems that have plagued Boeing's rival offering, the 787 Dreamliner.

Earlier this year, the 787s were grounded for four months to confirm their safety after several of their lithium-ion batteries overheated. The batteries are now encased to prevent any overheating from spreading.

The 787's launch also was repeatedly delayed, with it finally making its entry into service in 2011, frustrating JAL as well as rival All Nippon Airways, Japan's other major carrier.

"We are sorry for the troubles we have caused our customers with the 787, but the decision on the aircraft was considered separately from that issue," Ueki told reporters.

He repeatedly said the long-range, twin-engine wide-body A350 was chosen because it was the "best match for our needs."

He brushed off concerns about the additional training JAL pilots will need to fly Airbus planes, which they are not used to. Even after taking such costs and risks into account, the A350 was the best choice, he said without giving specifics.

Airbus and Boeing have for years waged a no-holds-barred slugfest in markets around the world. This commercial battle has also spilled over into a yearslong legal fight at the World Trade Organization between the two plane makers over government subsidies or other forms of state aid.

Lately the battle has focused on sales of the next generation of long-range, wide-bodied jets. In that matchup, Monday's order represents a big coup for Airbus.

Will Horton, senior analyst at CAPA Centre for Aviation, thinks JAL likely got a good discount from Airbus, which has been eager to break into the tough Japanese market.

"They may have been sold at cost, or below cost," he said.

JAL has wanted an aircraft like the A350, which is smaller than Boeing's 747 jumbo jets but slightly bigger than the 787, Horton said.

London-based aerospace analyst Howard Wheeldon said the motivation behind the deal was probably not just price. He said JAL appears to be copying the strategy of other airlines like British Airways and United Airlines in operating a mixed fleet.

"This is a great day for Airbus and one that is the result of a huge amount of effort," Wheeldon said. "But while Boeing may be disappointed to see that their big European competitor has made a big dent into a one of its traditional customers, this does not in my view signal anything other than a desire by JAL to operate a mixed fleet of the best available aircraft in the world."

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