PARIS TheStreet) -- AirFrance moved Tuesday to replenish its longhaul, widebody fleet, placing orders for two aircraft that, so far, have never flown commercially. Europe's largest airline ordered the next generation aircraft 787 from Boeing ( BA - Get Report) and the next generation A350 from Airbus.
Of the 110 orders, 50 are firm and 60 are options. The 50 firm orders include 25 each for the 787 and the A350. Through 2024, assuming 23 options are exercised, AirFrance would take 43 Airbus A350-900s and 30 Boeing 787-900s. For Air France, it's the first order the company's placed for long-haul aircraft since a 2004 merger with Dutch carrier KLM. The first 787 would enter service with KLM in 2016 and the first A350 would enter service with AirFrance in 2018. The order was the second split order from a leading global carrier this summer, following an announcement by AMR Corp.'s ( AMR) American Airlines in July that it would
take 460 narrow-body aircraft, with options for 465 more. The deals are an indication that "legacy carriers are finally getting around to modernizing," said aviation consultant Scott Hamilton, who follows Airbus and Boeing as managing director of Leeham Co. Shortly after midday, Boeing's stock was trading up $1.14 to $65.46. The AirFrance order "has been in the works for months," Hamilton said. "Some thought it would be announced at the Paris Air Show (in June), but it wasn't ready." Hamilton expects more orders to follow. He said Lufthansa "is evaluating the 767 and A350 with an order likely next year -- I think it very possible this could be split as well." United Continental ( UAL - Get Report), Lufthansa's partner in the Star Alliance, placed a split order in 2009. Boeing is scheduled to deliver its first 787 to Japanese carrier ANA on September 26. That first delivery was originally scheduled for May 2008. Whatever the timing, the Dreamliner Era seems close to beginning. "This (AirFrance) order is a good shot in the arm for the 787 program," Hamilton said. The A350 is scheduled for its first delivery in the middle of the decade. To an extent, the AirFrance order speaks to the separation between holding company components AirFrance and KLM, said aviation consultant Bob Mann. Though owned by the same company, "the airlines operate separately, maintain separate citizenship to preserve route rights, and have separate fleet planning," he said. "It is a holding company of convenience, with a lot of long-term dissimilarities."
With Toulouse-based Airbus a major employer in France, it is a political challenge for AirFrance to order from Boeing. At the same time, while AirFrance's entire narrow-body fleet is Airbus, its widebody fleet of about 110 aircraft is split and includes about 75 Boeing jets. The latest round of negotiations with the aircraft makers has been complicated by nationalist pressures, resembling the pressure on the Air Force to buy refueling tankers from Boeing. While the first 787 will enter service with KLM and the first A350 will enter service with AirFrance, the holding company said that "Later, both airlines will operate both types of aircraft." No date was specified. Mann said the AirFrance decision-making apparently reflected a desire for two types of aircraft, as opposed to the American Airlines decision-making, which reflected "opportunistically playing the manufacturers against each other and then deciding that the two deals were so good they had to take both." The A350s will be operated with Rolls-Royce Trent XWB engines, the only engine provided for the aircraft type, while the selections of engines for the 787 will be announced later, AirFrance said. At list price, the order would be worth $18 billion, although typically such large orders involve steep discounts. The new aircraft are expected to reduce fuel consumption by 15% as they replace older, less efficient planes. Boeing shares rose 2% to $65.66 in recent trades, making the stock one of the biggest percentage gainers in the Dow Jones Industrial Average. -- Written by Ted Reed in Charlotte, N.C. >To contact the writer of this article, click here:
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