JAL Deal Solidifies Boeing in Japan

Airline 's $1.8 Billion Order For 30 Jetliners Crimps Airbus 's Ambitions in Asia

The Wall Street Journal 02/07/05
author: Bruce Stanley
author: J. Lynn Lunsford
(Copyright (c) 2005, Dow Jones & Company, Inc.)

By agreeing to buy 30 single-aisle jetliners from Boeing Co., Japan Airlines has turned to the Chicago company for a second big order in almost as many months. The decision stymied rival supplier Airbus 's effort to expand its presence in one of Asia's biggest aircraft markets.

The deal, valued at $1.8 billion based on the list price for Boeing 's new 737NG airplane, solidifies the U.S. aerospace company's dominance in Japan at a time when both Airbus and Boeing are ramping up their sales campaigns in Asia. JAL said Friday it would order the 737NG planes to meet an expected increase in domestic flights to and from Tokyo's Haneda Airport, which is expanding to meet pent-up demand and plans to add a fourth runway in 2009.

The airline also wants to buy Boeings to help minimize the number of aircraft types in its fleet and therefore boost its efficiency, said JAL, which Friday announced a loss for last year's final quarter. Together with 176 Boeing planes, JAL flies 42 McDonnell Douglas single-aisle jets and 28 wide-body Airbus A300s that it inherited from Japan Air System, a separate airline with which it merged in April.

The carrier, Japan's largest, said it aims to complete a purchase agreement this spring and take delivery starting late next year. The 737NG has a list price of $60 million, but airlines rarely pay list prices, particularly on large orders. JAL said it plans to take options on 10 more of the jets.

The commitment comes in the wake of an even bigger deal in December, when JAL announced its intention to buy 30 Boeing 787 Dreamliners to replace older aircraft in its fleet. The value of that purchase would be $3.6 billion based on the 787's list price. The airline also took options for an additional 20 Dreamliners.

JAL's latest decision to buy from Boeing is a blow for Airbus , which is 80% owned by the French-German-Spanish consortium European Aeronautic Defense & Space Co. and which for years has sought to increase its presence in the Japanese commercial-aircraft market and was pushing hard to sell its A320.