Thursday, June 24, 2010

Russia to buy 50 Boeing 737s worth four billion dollars

AFP - Friday, June 25

WASHINGTON, USA (AFP) - – President Barack Obama on Thursday said that Russia was buying 50 Boeing aircraft valued at four billion dollars that could create 44,000 jobs in the struggling US economy.

Obama, speaking after White House talks with Russian President Dmitry Medvedev, said the order was part of a broad array of trade and investment deals between the two countries.

"Consistent with my administration's national export initiative, this includes the sale of 50 Boeing aircraft worth four billion dollars that could add up to 44,000 new jobs in the American aerospace industry," Obama said.

In a statement released after Obama's comment, Boeing said that it had signed a document with the Russian state corporation Rostechnologii "confirming the decision by Rostechnologii to place an order for 50 Boeing Next-Generation 737 airplanes."

The document was signed during Medvedev's official visit to the United States, the aerospace giant said, without providing further details.

"Rostechnologii's selection of Boeing airplanes demonstrates its commitment to deploying the optimal solution for the market needs," the Chicago-based company said.

Touting "the economic benefits and operating efficiencies" of the Next-Generation 737, Boeing said the planes would "directly support Rostechnologii's plan to provide Russian airlines with efficient and reliable airplanes that will help them to consolidate and grow their domestic and international operations."

"We look forward to continuing our long-term partnership with Rostechnologii and finalizing the contract," the company said.

Jim Proulx, spokesman for Boeing Commercial Airplanes, said in an interview with AFP that the 50 Next-Generation 737s were worth "3.6 billion dollars at current list price."

Commercial aircraft are often sold below list value.

Proulx noted the agreement signed was for the Russian state firm to purchase the planes, but further details needed to be worked out for a firm contract, such as which airlines would be taking the planes, delivery dates and deposit amounts.

The US company briefly announced at the end of May that the Russian state firm had selected the Next-Generation 737 for its aviation business development.

Boeing currently has an order backlog of 2,000 for the planes.

Last week Boeing announced a second production rate increase on the Next-Generation 737 program, taking the rate from the rate of 34 airplanes per month, previously announced in May, to 35 planes in early 2012, citing continued strong demand.

Spending Spree by Emirates Shakes Up Airline Business

Published: June 23, 2010

LONDON — Emirates, the international airline, is rattling rivals in Europe and Asia with a growth splurge that may be as game-changing for long-distance carriers as the expansion of Ryanair and Southwest Airlines was over shorter routes.

Emirates, a 25-year-old company, is building up a fleet of 90 Airbus A380 superjumbo aircraft with a total of 45,000 seats and operating costs that the manufacturer says are 12 percent lower than those for Boeing’s latest 747.

That is a threat to European carriers that specialize in the same long-distance transfer traffic, the chief executive of British Airways, Willie Walsh, said during an interview.

Emirates’ latest order, for 32 A380s worth $11 billion, was announced this month. It will give the airline 70 more superjumbos than any other airline, funneling price-sensitive passengers through its Dubai hub in a challenge to network carriers including Lufthansa, Air France-KLM and Singapore Airlines. Competitors say that the company is benefiting from government ownership and that they cannot compete with its purchasing power.

“It’s a miracle that Emirates already has more intercontinental seats than Air France and British Airways combined,” said Wolfgang Mayrhuber, the chief executive of Lufthansa. “It took us 40 years to get 30 747s in the air in one of the biggest global economies, so one must assume that this is an investment for the world.”

Emirates ranked only 24th among international airlines as recently as 2000, putting it on a par with Sabena, the state-owned Belgian carrier that failed a year later. In the intervening period the Gulf carrier has increased traffic sixfold, overtaking Lufthansa last year to become the biggest carrier for international flights. British Airways, ranked No.1 in 2000, now is fourth.

“We always planned to grow,” Maurice Flanagan, the founding chief of Emirates and current executive vice chairman, said during an interview. “We were just never able to put our finger on how quickly. Now we’re short of capacity all the time.”

Rivals should follow the Emirates example in buying more large planes to reduce expenses per head, he said.

“I can’t understand why other airlines have been so slow to pick up on the A380,” Mr. Flanagan said. “The economics are fantastic.”

Emirates, which reported net income of $964 million for the year ended March 31, has reached the top spot while remaining outside the three main airline groupings, choosing instead to build Dubai into a transfer hub to compete with alliance bases in London, Frankfurt, Amsterdam, Paris, Singapore and Hong Kong.

Chris Tarry, an independent analyst who has followed the airline industry for two decades, said the model was largely the result of improved jetliner range and Dubai’s fortuitous location midway between Europe and Asia.

“First, there’s now the technological capability to join any two places on the globe with just one stop,” Mr. Tarry said from London. “Second, Dubai is very well placed to capture those intercontinental traffic flows from North America to Asia and Europe to Asia and Australia and so on.”

Emirates has 14 daily routes from six British airports, including five from Heathrow, the busiest European hub, and three from London Gatwick. Starting in September, one of two daily flights from Manchester in northern England will handle the A380, the plane’s first service to a secondary city.

Weight reductions and improved fuel loads should allow the superjumbo to reach the West Coast of the United States from Dubai by 2014, Mr. Flanagan said. The chief salesman for Airbus, John Leahy, predicted that more airlines would buy the plane to defend market share from Europe to Asia and across the Pacific.

While Mr. Flanagan estimates that 40 percent of traffic from Britain connects to other cities via Dubai, Mr. Walsh, the British Airways chief, says that the Gulf carrier is a bigger threat to Lufthansa and Air France-KLM because of the greater proportion of transfer passengers who travel through Frankfurt, Paris and Amsterdam.

“It’s definitely going to have an impact on the business,” Mr. Walsh said last week. “It’s challenging a segment of the market that is important for B.A. But there are other European hubs where the reliance on transfers is bigger.”

The British carrier’s Oneworld alliance partner, Cathay Pacific, will aim to counter the expansion of Emirates with “enhanced connectivity” from its own hub in Hong Kong, a spokeswoman said in an e-mail message.

The Emirates model is eroding network carriers’ long-distance traffic in the same way that discount airlines have eaten into short-haul operations.

The effect could be even greater, since much of the success of Ryanair, which has increased revenue eightfold, to €3 billion, or $3.7 billion, in a decade to become the biggest European low-cost airline, came from linking cities with no air service, whereas Emirates is confronting established carriers more directly on some of their most profitable routes.

Basic to the strategy is the use of so-called sixth-freedom treaties that permit flights between two nations by an airline from a third via its home country. The model works best on long-distance routes requiring refueling, on which Emirates does not lose out to competitors by stopping in Dubai, and for passengers who care more about ticket prices than the duration of a journey.

Andrea Rothman reported from Paris.
Bloomberg News

Wednesday, June 9, 2010

Berlin Air Show takes off with record 'superjumbo' order

AFP - Wednesday, June 9

The 100th edition of the Berlin Air Show took off with a roar Tuesday as Dubai-based airline Emirates snapped up 32 Airbus A380 superjumbos, hailed as the largest order ever for commercial aircraft.

In the year's first order for the massive A380 plane, Emirates splashed out 11.5 billion dollars, providing a much-needed boost to Airbus and a headline-grabbing start to the Show.

"It's the largest order ever placed for civil aircraft by dollar value based on catalogue prices in aviation history," said a delighted John Leahy, chief commercial officer at Airbus.

Airbus also announced that TAM Airlines of Brazil had ordered 20 A320 planes and five of its new long-haul A350-900 aircraft, with the deal worth around 2.9 billion dollars (2.43 billion euros) at catalogue prices.

And in another boost for Airbus, France, Germany and Spain pledged cash to help the firm develop the A350 XWB wide-bodied aircraft.

Paris would stump up 1.4 billion euros, Berlin 1.0 billion euros and Madrid 350 million euros, representatives of the various governments said at the Show.

Running until June 13, the Berlin Air Show (ILA) was set to attract about 1,150 exhibitors from nearly 50 countries presenting all manner of planes, helicopters, rotors, motors and other technology to around 200,000 visitors.

The ILA this year was opened by Chancellor Angela Merkel who hailed the special role played by the aviation industry in Germany's economy.

"Aviation is, as it has always been, an area of the economy that pushes forward the development of technology in general," she said.

"Therefore, for a business location such as Germany, aviation technology has an influence that goes far beyond its own domain," added the chancellor.

With the annual gathering of the International Air Transport Association (IATA) also taking part in Berlin at the same time, almost all of the high-fliers in the aviation world were to be found in the German capital.

However, while the aircraft suppliers were feting Merkel at the ILA, on the other side of town, their main customers at the IATA meeting were attacking her after she announced Monday a new tax on passengers leaving German airports.

The tax, which Merkel outlined Monday as part of a multi-billion package of belt-tightening measures, is set to run until the carbon-emissions trading scheme that has already been agreed comes into effect for air travel in 2012.

It is expected to bring in about one billion euros annually.

IATA's director general, Giovanni Bisignani, called for the tax to be scrapped immediately, saying it threatened to bring airlines down just when they were starting to see a recovery after several years of massive losses.

"This is the worst kind of short-sighted policy irresponsibility. It's a cash-grab by a cash-strapped government," he told reporters in Berlin.

"If this is related to the environment ... I would like the chancellor to say to us, where is the investment? How many trees is she planting with this one billion?" he said.

"This is not the time to burden the aviation industry with more taxes ... this tax is a body blow to the weak economy and a fragile industry," he added.

IATA had earlier revised up its forecasts for this year, projecting the industry's first profit since 2007.