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ANA boosts 787 in $16.6 billion Boeing shopping spree

Bloomberg

ANA Holdings Inc. gave Boeing Co.’s 787 Dreamliner a vote of confidence by ordering 14 more of the jets as part of a $16.6 billion shopping spree a year after regulators grounded the composite aircraft.

ANA’s 70-plane purchase Thursday tilted toward Boeing, with the U.S. maker accounting for all 40 long-haul models in the deal, with a list value of about $13 billion. France-based Airbus, seeking to crack Boeing’s grip on Japanese airlines’ wide-body fleets, sold 30 narrow-body jets.

“I wouldn’t call this a split order: Boeing won,” said Richard Aboulafia, an aerospace analyst with Teal Group, a consultant based in Virginia.

As the biggest Dreamliner operator, ANA demonstrated its faith in a plane whose commercial debut with Japan’s largest carrier ran more than 3½ years behind schedule. Months of wooing by Boeing paid off as ANA agreed to buy 14 of the 787-9 model, 20 of the upgraded 777X jets due to debut at the end of the decade, and six current 777s to help bridge the gap.

ANA will get seven Airbus A320neo models and 23 A321neo planes, with deliveries from 2016 to 2023. The purchase of those models, the newest offerings from the Airbus single-aisle jet family, is ANA’s first from the European group since ordering A320s in the 1990s.

“Both aircraft makers were very aggressive in their sales pitches,” ANA President Shinichiro Ito told reporters in Tokyo. “That helped us secure even better conditions.”

Airlines typically get a discount from list prices.

Boeing has long dominated sales of single- and twin-aisle planes in Japan, adding urgency to its pursuit of the ANA order after Japan Airlines Co.’s first-ever Airbus purchase in 2013. In that $9.5 billion deal, JAL ordered 18 wide-body A350-900 models and 13 of the larger A350-1000 variant, plus options for 25 more jets.

“They managed to stop ANA from following JAL in ordering A350s,” Aboulafia said. “By getting more aggressive on the 777 after dragging their heels they managed to convince the Japanese that they’re serious about moving forward with a plane that has the Japanese market in mind.”

ANA is buying the 9X variant of the new 777, along with the existing 777-300ER. The 777 is already the world’s biggest twin-engine jetliner, and the upgraded versions will feature a stretched cabin and a wider wingspan. Deliveries will run from fiscal 2017 to 2027.

The Dreamliner transaction will push ANA’s 787 fleet to 80 planes. The 787-9 Dreamliner — designed to fly 280 passengers and boasting a range as long as 15,159 km — will debut later this year alongside the smaller current version, the 787-8.

“Fact is, once we’re through the teething problems it’s clearly the best aircraft at that particular size point,” said Nick Cunningham, a managing director at Agency Partners in London.

With Thursday’s order, Airbus is still expanding its foothold in Japan, where Boeing has had a near-monopoly dating to the years after World War II. The ANA order will help Airbus move toward a goal of doubling its market share in Japan to 25 percent by 2020.

“Fundamentally what this is telling us is that Japan is an open competition now,” said Michel Merluzeau, a managing partner at consultant G2 Solutions Inc. in Washington state. “Airbus has made more progress in the past three to five years than in the previous 20 or 30 years.”

Airbus’ narrow-body win is a blow for the Boeing’s 737 Max program, Merluzeau said. The growing popularity of Airbus’s A321 for medium-range flights may prompt Boeing to hasten development of a replacement to the out-of-production 757, he said.

Both ANA and JAL were early customers of the Dreamliner, which was ordered parked by regulators around the world for three months last year after batteries smoldered on two of the 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.”

Japanese companies designed and supplied 35 percent of the structure of the 787, with Mitsubishi Heavy Industries Ltd. making the wings and Kawasaki Heavy Industries Ltd. and Fuji Heavy Industries Ltd. assembling a front fuselage section and center wing boxes.

Boeing is increasing work in the U.S. with the 777X. The company 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.