Boeing Beaten Out by Airbus for Major Order
Boeing Co. lost a major jetliner order to its primary rival Monday when Europe’s largest budget airline said it would buy 120 Airbus planes with a potential value of at least $4 billion.
The decision by EasyJet to buy the 150-seat Airbus A319, the largest single airliner order this year, came as a bitter blow to Boeing, which has been struggling with dwindling orders for its jets since the Sept. 11 terrorist attacks.
Coupled with a general downturn in the economy, the attacks led to a sharp drop in air travel, placing many airlines in a severe financial crunch.
Industry analysts said losing the contract to Airbus is likely to prolong the slump in Boeing’s commercial aircraft business, which company executives had hoped would end by 2004. That scenario now seems optimistic.
Boeing is “considering flat to down production rates for 2004 for large civil aircraft,” Byron K. Callan, an aerospace analyst for Merrill Lynch, wrote to investors Monday. “The loss of the EasyJet competition to Airbus should bolster this view.”
The failure to win the contract prompted investors to unload Boeing shares, which fell 94 cents to close at $31.06 in trading on the New York Stock Exchange.
Ironically, winning the order also hurt shares of Airbus’ parent, European Aeronautic Defence & Space Co., which dropped 4.4% on the Paris Stock Exchange as investors there worried that Europe’s largest commercial aircraft maker may have sweetened the pot too much to win the bidding.
London-based EasyJet said Airbus had offered it 30% in savings, which included lower operating costs over its current fleet of Boeing 737s as well as a 20% discount on the price of the aircraft.
“After exhaustive research and several rounds of negotiations with both Airbus and Boeing, the board is convinced that we have achieved a tremendous deal,” EasyJet Chief Executive Ray Webster said in a statement.
Like Southwest Airlines, EasyJet has become one of the few profitable airlines by offering no-frills service.
EasyJet, which recently acquired rival Go airlines, had been operating a fleet made up exclusively of 737s.
The 737 had been the favored plane by low-fare carriers, but Boeing now has seen two major budget airlines shift to Airbus. New York-based JetBlue Airways, which operates its Southern California flight schedule out of Long Beach Airport, broke Boeing’s stranglehold in 1999 by selecting the Airbus A320 for its fleet.
This year, Boeing won a major competition to supply 100 737s to Ryanair, another European budget carrier.
