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ANA splits $16.6 billion airliner order

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Bloomberg News
Published:
TOKYO — ANA Holdings, Japan’s largest airline, split a $16.6 billion order for new aircraft between Boeing and Airbus in the biggest purchase in the carrier’s history.
ANA agreed to buy 40 aircraft from Boeing and 30 planes from Airbus, the Tokyo-based company said. The jets will be delivered between fiscal year 2016 and 2027, according to the airline. The purchases, approved by the board Thursday, will help increase the carrier’s fleet to 250 planes.
The orders are significant for Boeing after losing a $9.5 billion deal by Japan Airlines to Airbus last year that enabled the European company to expand its foothold in Japan, where the U.S. planemaker has had a near-monopoly since World War II. The order from ANA will help Airbus move toward a goal of doubling its market share in Japan by 2020.
“It’s probably important to Boeing that what was a fortress market for them has now been breached,” said Timothy Ross, a Singapore-based transportation analyst at Credit Suisse Group AG. “No airframe manufacturer should have 100 percent of any country.”
From Boeing, the carrier agreed to buy 20 777-9X, 14 787-9 and six 777-300ER planes, to be delivered between fiscal 2017 and 2027, giving the Chicago-based planemaker orders for 1.36 trillion yen. The purchase of additional 787s will increase the company’s fleet of Dreamliners to 80, confirming ANA as the world’s biggest operator of Boeing’s marquee jet.
ANA and Boeing have a “long and successful” partnership that spans more than five decades, said Ray Conner, the manufacturer’s commercial airplanes president.
The airline is buying seven A320neo models and 23 A321neo planes from Airbus, cumulatively worth 366 billion yen in list prices. Deliveries will be between fiscal 2016 and 2023.
Planemakers typically offer discounts to customers when making large purchases.
“Both aircraft makers were very aggressive in their sales pitches,” ANA President Shinichiro Ito said in Tokyo. “That helped us secure even better conditions.”
ANA closed unchanged at 220 yen in Tokyo trading. The stock has gained 4.8 percent this year.
Buying the Neos would be ANA’s first from Airbus since purchasing A320 single-aisle aircraft in the 1990s. ANA needed a replacement for its A320s that the carrier uses domestically and has been considering a replacement for aging wide-body 777-300s used on international routes.
ANA had 198 Boeing jets, or 84 percent of its fleet of 236 planes, as of March 24, compared with just 16 Airbus A320s.
JAL, Japan’s second-largest carrier, last year announced its first-ever order for Airbus planes in a $9.5 billion deal. The carrier ordered 18 twin-aisle A350-900 aircraft and 13 larger A350-1000s, plus options for 25 more jets.
Airbus Chief Executive Fabrice Bregier has said the Toulouse, France-based manufacturer’s planes will make up 25 percent of Japanese airline fleets by 2020. Boeing has dominated the Japanese aviation market for half a century, making it a last bastion in an industry otherwise marked by a balanced duopoly between the European and U.S. planemakers.
The company is “delighted to welcome them as our first Neo customer in Japan,” said Stephane Ginoux, president of Airbus Japan, referring to the ANA order.
Both ANA and JAL were early customers of Boeing’s 787 Dreamliner, which was delayed more than three years and grounded globally for three months last year after batteries smoldered on two of the Japanese airlines’ jets.
“Airbus really wants to be in the Japan market and so will have offered discounts to secure their order,” said Ryota Himeno, an analyst at Barclays Securities Japan Ltd. “ANA will have negotiated with Boeing and played them off Airbus to get a cheaper price. They probably also got a discount for the problems with the 787 as well.”
The 777X, unveiled in November amid a $100-billion order blitz, is the first twin-engine plane with range and payload comparable to a four-engine jumbo. Boeing said the larger version, the -9X, will be 12 percent more efficient than the A350-1000.
For decades, Boeing claimed a fortress-like grip on the Japanese market as plane sales matched the increasing role that local manufacturers played in its aircraft supply chain.
Japanese companies designed and supplied 35 percent of the structure of the 787, with Mitsubishi Heavy Industries making the wings, and Kawasaki Heavy Industries and Fuji Heavy Industries assembling a front fuselage section and center wing boxes.
Boeing is increasing work in the U.S. with its latest 777, which is set to reach the market by the end of the decade. Boeing said in January it would manufacture the jet’s all-composite wing near its Seattle-area commercial hub, in exchange for union concessions guaranteeing labor peace through 2024.
Airbus planes use about $1 billion of parts and materials annually from manufacturing partners in Japan and the company is seeking to expand its supplier base in the country.

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