Boeing, Airbus Win Orders for 126 Jetliners
Signaling continued good times ahead for commercial aircraft manufacturers, International Lease Finance Corp. of Century City said Tuesday it would buy 126 jetliners from Boeing Co. and its European rival, Airbus Industrie.
ILFC, a subsidiary of New York-based insurance company American International Group, said it will buy 61 planes from Boeing and 65 from Airbus. First deliveries of the new jets--mostly narrow-body models like Boeing’s 737 and Airbus’ A-320--are scheduled to begin in April 1999 and continue until 2006. ILFC will then lease them to commercial carriers, such as Southwest Airlines, British Airways, KLM and Qantas.
Orders for new aircraft this year have been off the 1996 peak of about 920, but analysts say they expect the market to remain strong even as the industry experiences an inevitable cyclical downturn. ILFC’s decision to buy so many new planes when supply is already tight is a good indication that airlines see more growth ahead, albeit at a slower rate.
John Pincavage, a transportation analyst with SBC Warburg Dillon Read in New York, said ILFC probably has commitments for all of its planes through 2000 and decided to place a new order to “get a jump on the competition.”
“They go for large orders well in advance of anyone else,” Pincavage said. “They are one of the largest--but at the same time most prudent--players in the industry.”
The Boeing order includes 31 737-600s, one of the company’s next-generation workhorse planes that can seat 108 each. ILFC also ordered 12 of Boeing’s biggest jets--two 747s and 10 777s--plus six 757s and 12 767s. ILFC has been Boeing’s single biggest customer over the last six years, according to Ron Woodard, president of Boeing Commercial Airplane Group.
The bulk of the Airbus order--50 planes--is for A-320s, which seat 150, and its derivatives, the 124-seat A-319 and the 185-seat A-321. The order also includes 15 aircraft from the larger A-330 family, which typically seat 253. ILFC is Airbus’ largest customer.
Based on the list price of the 126 planes, the value of the deal is about $8.5 billion. But analysts believe that ILFC secured a 15% to 20% discount by buying in bulk.
ILFC owns about 380 jets valued at more than $16 billion. The company plans to sell 30 to 35 of its planes annually to maintain a technologically advanced fleet, said John Plueger, ILFC’s executive vice president and chief operating officer.
Airlines traditionally lease airplanes when they can’t afford to buy them. But carriers are increasingly leasing planes to serve some of their peripheral routes, which may not justify the 20- or 30-year commitment that buying a new plane entails, said Peter Aseritis, an aerospace analyst at Credit Suisse First Boston in New York. The most popular planes to serve those routes are the narrow-body models like the 737 and A-320.
Boeing’s 61 new orders come at a time when the Seattle firm aims to boost its monthly output of planes to 43 in the second quarter of next year, up from 18 last year, Aseritis said. That may hasten the day when the company moves some of its production to the Douglas Aircraft division in Long Beach, which Boeing acquired when it bought McDonnell Douglas. Aseritis predicted that in the next year or two, Boeing will phase out production of the MD-80 and MD-90 lines and start making its 757 planes in Long Beach instead.
Tuesday’s deal brings the number of new orders for 1997 to 301 for Boeing (not including orders for models made by McDonnell Douglas, which Boeing acquired last month) and 176 for Airbus. Last year, Boeing secured 539 net new orders for jets and Airbus racked up 301. Although Tuesday’s order was split in Airbus’ favor, Boeing commands about two-thirds of the total market.
Boeing stock rose $2.50 to close at $57 on Tuesday. Shares in American International Group rose $3.75, closing at $98.13. Both trade on the New York Stock Exchange.
Airbus Industrie is an international consortium based in Toulouse, France, that is jointly owned by British Aerospace, Germany’s Daimler-Benz, France’s Aerospatiale and Spain’s Construcciones Aeronauticas.
