FedEx Win Boosts Boeing

Shares jump 3% after a big Airbus customer defects.
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Updated from 1:53 p.m. EST

Boeing

(BA) - Get Report

rose 3% after

FedEx

(FDX) - Get Report

placed a big order for its 777 freighter and became the first customer to cancel an order for the troubled Airbus A380 super jumbo jet.

Memphis, Tenn.-based FedEx ordered 15 new planes and took options on 15 more after terminating orders for 10 Airbus A380s. The move represented another disappointment for the A380 program, which has faced repeated production snags, resulting in management upheaval at Airbus, the European planemaker.

"Global demand for air cargo and express services continues to grow rapidly, and FedEx has made significant investments in our network to meet customers' needs and fulfill our business objectives," FedEx said. "Therefore, it was necessary and prudent for us to acquire the Boeing 777 Freighter."

Boeing shares rose $2.70 to $83.18.

CreditSights analyst Brian Studioso said FedEx's move "is a big deal as far as being the first customer to pull an order from Airbus and go to Boeing, although it's not one of the biggest orders.

"Usually

for the manufacturers, it's more important what passenger airlines do," Studioso said. "The freighters usually buy old, used aircraft and do conversions. But this has a symbolic meaning. It shows that customers can and are willing to pull out of Airbus orders because of the delays."

FedEx Express said it continues as Airbus' largest wide-body airplane customer and will continue to add new and used Airbus wide-body aircraft to its fleet. Six new A300-600s are scheduled to join the FedEx fleet in 2007.

Meanwhile,

UPS

(UPS) - Get Report

said it won't be influenced by its rival's shift, but it continues to closely monitor the A380 delays.

UPS has 10 Airbus 380s on order and options for 10 more. The first delivery was to be in the fourth quarter of 2009, but is now scheduled for spring 2010. FedEx had been ahead of UPS in line, with its first delivery originally scheduled for the first quarter of 2009.

"UPS hasn't made any changes to our order at this point," said spokesman Mark Giuffre. "We continue to evaluate our order and the aircraft itself, and we continue to ask Airbus for more information regarding the causes of the delays and the status of the projected delivery schedule, and we continue to evaluate all of our options."

Giuffre said UPS' priorities continue to be whether it can meet its customers needs for capacity, as well as the environmental and economic issues associated with its aircraft. "We were first told there were no delays in

A380 program, then later we were told there would be delays," he said. "We continue regular discussions with them."

Although FedEx and UPS constantly seem to react to one another on such issues as pricing and labor agreements, Studioso said the connection is not so clear in terms of aircraft orders.

"As far as capacity going into the next 10 years, UPS has to make their own decision as to how they can meet that demand," he said.