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The Week Of:
October18,1999

British Airways Picks A318 Over Boeing 717 For Narrowbody Purchase

Airbus Industrie won the prized 100-seat airliner order from British Airways last week ending a heated battle with rival manufacturer Boeing.

The award surprised many who expected the airline to choose the Boeing 717-200, particularly after Boeing agreed to buy 34 aging 757s from BA for a new cargo conversion program. (See related story)

BA will buy as many as 24 Airbus A318s in the form of 12 firm and 12 options for the aircraft. The firm order at list prices is valued as high as $470 million, although it is highly doubtful BA paid prices that high.

Speculation that Airbus was taking significant losses on the deal for this breakthrough A318 order began immediately after the order was announced on Monday. No parties in the transaction would reveal purchase prices, and despite denials from Airbus, the discount on this particular order is believed to be deep.

Winning a high-profile, blue chip customer like BA is a tremendous endorsement for either aircraft program. Boeing has 115 sales for its 717-200, plus 13 pending from Hawaiian Airlines, but its top customers for the aircraft (AirTran and Trans World Airlines) are not in the best financial situations.

Many expected Boeing's purchase of the BA 757s would sway the airline to award it the 717 business, and that BA would prefer the fact that the 717-200 is already in the market. The A318 will not be available for another 18 months. But in Airbus's favor is that BA most recently ordered single-aisle planes from them.

In fact, BA said their decision in favor of the A318 was based on commonality with its existing A320s, which means the airline would save dramatically on pilot and crew training costs. BA also said the residual values are likely to be better for the A318.

The A318s will be powered by the Pratt & Whitney PW6000 engine, which so far is used only on this aircraft. The engine program is quite dependent on the success of the A318.

Airbus now has 45 sales for its A318, not counting options and other unsigned deals. The total number of orders and commitments for the A318 is 157, Airbus says.

Contrary to some reports last week, Boeing says it is not deciding the fate of the 717 by the end of the year.

"Boeing completed its analysis of the 717 and other programs last spring and it passed muster," said Boeing spokesperson Sean Griffin. "That's why Boeing took the 717 to Paris to pronounce and demonstrate its commitment to the 717 program. Boeing is fully committed to the Boeing 717."



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