Japan Airlines orders 31 Airbus A350s in $9.5bn deal
October 07, 2013 - 9:58:10 am
TOKYO: Japan Airlines said Monday it is ordering 31 Airbus A350 planes in a deal valued at $9.5 billion, challenging Boeing's dominance in the Japanese market as it struggles with the troubled Dreamliner.
The carrier said it had signed a purchase agreement for 18 long-haul A350-900s and 13 A350-1000s, with an option to buy another 25 aircraft.
The deal marks the first time JAL has bought Airbus planes with the slate of new aircraft expected to come into service from 2019, the carrier said, as it replaces its ageing Boeing fleet.
The deal was announced after markets closed but investors cheered reports of the purchase earlier Monday with JAL's Tokyo-listed shares closing 3.01 percent higher at 5,810 yen as the broader marker fell 1.22 percent.
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 sideswiped 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.
The Japanese carriers the single biggest operators of the Dreamliner have put their fleets back into service.
But they are seeking compensation from US-based Boeing of more than $200 million for the string of problems which forced them to cancel flights and took a bite out of their bottom line.
"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 for their planes."
Despite a lengthy investigation, Boeing has not identified the root cause of the Dreamliner's battery problems, but said it put safeguards in place to prevent future incidents.
On Monday, JAL pointed to the A350's lighter weight materials which help cut down on fuel costs, usually an airline's single-biggest cost a feature that Boeing played up with its Dreamliner.
The order 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 following an $8.5 billion initial public offering, one of the biggest offerings in 2012.
JAL posted strong earnings after its re-listing, making it the most profitable airline in the world, but a government bailout to rescue the carrier has led to acrimony between Japan's biggest airlines with ANA routinely criticising its rival's monster bailout.
On Friday, JAL said it had lodged a complaint over Tokyo awarding twice as many lucrative landing slots at a major airport to ANA, in an apparent attempt to level the playing field after the bailout.
That came two days after the government said ANA would get 11 of 20 new international take-off and landing slots at Haneda airport in Tokyo bay, the world's fourth-busiest hub.
JAL, which had expected to share the slots evenly with its main domestic rival, got just five with the remaining four slots to be distributed in the future (AFP)