Airbus SE and Boeing Co. secured more than $75 billion in single-aisle plane commitments Wednesday, demonstrating unrelenting appetite for their most popular planes from discount carriers as the airlines lock in deals to support growth for years to come.
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Airbus secured what it called one of the biggest aircraft deals in its history with a 430-jet agreement with airlines linked to Indigo Partners LLC, a U.S. private-equity group with stakes in some of the fastest-growing low-cost carriers on three continents. In the U.S., Indigo is best known for transforming Spirit Airlines Inc. into a successful ultra low-cost carrier before selling the stock to take over Frontier Airlines.
The proposed deal, announced Wednesday at the Dubai Airshow, carried a sticker price of almost $49.5 billion before the customary discounts that can reduce the true value by 50% or more. Consolidation in the airline and finance industries is giving buyers more clout.
Boeing followed shortly after with a deal to sell Flydubai up to 225 more of its 737 Max planes, including the newest and largest version, the Max 10. The deal is for 175 firm commitments with purchase rights for more, Boeing said, with a combined list price value of $27 billion.
"We think low-cost travel will certainly grow much faster than the rest of the market," said Boeing Commercial Airplanes marketing vice president Randy Tinseth.
Airbus and Boeing are aggressively boosting production of these single-aisle planes to satisfy demand. Executives at both manufacturers in recent months have said they could build more planes. Demand is there, they say, though there are concerns suppliers may struggle to keep pace with the torrid pace of production.
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Boeing is building 47 single-aisle planes a month this year, with plans to produce 52 a month in 2018, and 57 in 2019. "There is upward pressure" to go higher, Mr. Tinseth said. Airbus is boosting output to 60 A320 planes a month starting in 2019 and has considered making 63 a month.
Deliveries on the Airbus deal stretch from 2021 to 2026. Flydubai said its deliveries run until 2029.
Airbus said the Indigo Partners deal tops one by other budget airlines AirAsia and India's unrelated IndiGo, making the financial investor its biggest customer by list price.
Indigo, based in Phoenix, is led by industry veteran Bill Franke, who has invested in a number of carriers including holdings in Frontier Airlines in the U.S., Hungary's Wizz Air Holdings PLC and Mexico's Volaris. It also backed JetSmart, a new Chile-based carrier that launched this year.
The preliminary agreement covers 430 planes--73 A320neos and 157 of the larger A321neo model--doubling the potential orders from the four Indigo-linked airlines.
Denver-based Frontier plans to take 134 jets, with Wizz receiving 146 planes pending shareholder backing. Volaris would receive 80, with 70 for JetSmart.
Budget airlines tend to place massive plane orders at once to get bigger discounts from plane makers. The big commitments allow the manufacturers to build planes more efficiently, lowering costs, and enable them to pressure their own suppliers for discounts.
For Airbus, the deal is a bit of good news amid several headwinds. Regulators in the U.S. and Europe are scrutinizing sales by the European company for potential wrongdoing. Airbus said it had brought the potential misdeeds to the attention of regulators and was cooperating with the investigations.
Emirates Airline, the world's largest by international traffic, Sunday snubbed the plane maker on a roughly $15 billion A380 superjumbo order, refusing to finalize the deal unless Airbus made firm commitments to build the plane for at least another decade.
The European manufacturer has trailed rival Boeing Co. in securing new orders this year, garnering more than 300 before Wednesday's announcement, compared with more than 600 for its U.S. rival. Airbus officials hope to finalize the deals by the end of the year.
It is unusual--but not unprecedented--for airlines to order aircraft jointly. Emirates Airline and Qatar Airways cooperated as launch customers for the Boeing 777X at the 2013 Dubai Airshow.
Abu Dhabi-based Etihad Airways also combined an order for Boeing 787 Dreamliners with one from now defunct Air Berlin, in which it held a minority stake.
The Dubai Airshow can be a hotbed for plane deals. Four years ago, Boeing snagged a $76 billion deal from Emirates Airline for the 777X. The carrier at the same event ordered 50 A380 superjumbos valued at around $22 billion at today's list price. A decade ago, Dubai Aerospace Enterprise drew attention for the then-massive 200-plane deal split equally between Airbus and Boeing for different plane models. DAE was forced to cancel the $27 billion in plane orders when it ran into financial trouble.
Several years of strong order intake has helped Airbus and Boeing amass huge backlogs, particularly for their single-aisle jets, stretching five or more years, even though both are boosting output.
However, analysts are cautious on whether some of the big customers will take all of their planned jets on schedule, particularly if an economic downturn slows traffic growth. Plane makers can boost profits by agreeing to defer aircraft deliveries.
Gus Kelly, chief executive of aircraft lessor AerCap Holdings NV, this week said placing aircraft orders often represents a career highlight for some airline CEOs. Speaking at an investor conference, Mr. Kelly said that some of these orders had served only to benefit the shareholders of Airbus and Boeing.
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(END) Dow Jones Newswires
November 15, 2017 08:01 ET (13:01 GMT)