• Bloomberg

  • SHARE

Boeing Co. has orders for 71 planes worth about $10 billion from Japan Airlines Corp., which filed for bankruptcy Tuesday. That’s 21 more than the U.S. company had previously disclosed.

JAL has contracts for 20 737 short-haul airliners, together with nine 767 and seven 777 wide-bodies, as well as 35 of the new 787 Dreamliners, Randy Tinseth, the manufacturer’s marketing chief for commercial aircraft, said Tuesday in Dublin.

The airline plans to cut almost one-third of its workforce, 31 routes and 53 planes. JAL spokeswoman Sze Hunn Yap said she wasn’t aware of any plans to drop existing orders for new planes.

“The only thing we know for certain right now is that JAL is going to be a smaller carrier, which by definition means they’re going to need fewer aircraft,” said Michael Derchin, an analyst at FTN Equity Capital Markets in New York. “That doesn’t necessarily jeopardize those Boeing orders, but it certainly adds a cloud over them.”

Of JAL’s order backlog, 10 737s, two 777s and the 767s had not previously been attributed by Boeing. The carrier has no commitments with Airbus SAS, the biggest maker of commercial aircraft.

“It’s early in the process and it’s difficult to understand now how this will affect the market,” Tinseth said in the interview. “There’s no question that they’ll work hard in reworking their network, and we’ll work with them to ensure that we meet their needs.”

JAL’s turnaround plan will accelerate a shift to smaller aircraft as the carrier seeks an operating profit in the year ending in March 2012, compared with an expected operating loss of ¥265.1 billion this fiscal year.

The company, founded in 1951, plans to phase out its 37 747-400 jumbos, together with 16 single-aisle MD-90s.

The move to ground older models may depress the resale and rental value of Boeings, including 747s and 767s, according to attendees at the 2010 European Airfinance Conference in Dublin, where Tinseth was interviewed.

“I’m expecting JAL to move out a lot of older equipment,” said Simon Finn, senior vice president at the aviation unit of DVB Bank. The residual value of Boeing wide-bodies may be hurt most because secondary-market demand is already low, he said, adding that the 767s “will be very difficult to shift.”

Hayrettin Yagiz, a leasing consultant based in Turkey, said JAL’s strategy will affect rates “negatively for (leasers) and positively for lessees.”

While eliminating some bigger aircraft, JAL plans to add 50 smaller planes, supplementing a fleet that was 279 strong as of last March 31, including regional jets from Bombardier Inc. and Empresa Brasileira de Aeronautica SA.

JAL will scrap 14 international routes and 17 domestic ones by the end of March 2013 under a ¥900 billion plan announced Tuesday by Enterprise Turnaround Initiative Corp. of Japan, the government-affiliated fund leading the reorganization. Employment will drop by about 15,700 workers to 36,201 over the period.

JAL, with a market value of more than $6 billion as recently as March, will be delisted following the bankruptcy.

Delta Air Lines Inc. and American Airlines, which have made rival offers to invest in JAL, both said talks would continue. JAL is likely to switch to Delta’s SkyTeam alliance from American’s oneworld as part of the turnaround, according to sources and previous reports.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.

SUBSCRIBE NOW

PHOTO GALLERY (CLICK TO ENLARGE)