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Texas Air to Buy 40 Airbus Jets for Continental

November 17, 1989|ROBERT E. DALLOS | TIMES STAFF WRITER

NEW YORK — Texas Air Corp. said Thursday that it will buy 40 European-made Airbus A330 and A340 aircraft for its Continental Airlines subsidiary in a deal that could total $4.5 billion.

Frank Lorenzo, chairman of Texas Air, said the planes will be used by Continental to enable it to develop "important" new markets and to replace older airliners. He added that some of the planes might also be used eventually by his company's other subsidiary, Eastern Airlines, which is trying to work its way out of bankruptcy.

It was the second major commercial airplane order announced this week. Delta Air Lines said Tuesday that it was buying $10 billion worth of planes from Boeing Co. and McDonnell Douglas Corp.

"These aircraft place us in a strong position to capitalize on the new and exciting opportunities we have for growth in both the Pacific and Europe," Lorenzo said, "and in particular as a result of the recently signed U.S.-Japan bilateral agreement." The two nations have agreed to increase the number of commercial air routes between them.

Lorenzo said Airbus Industrie, a European consortium, plans to finance the purchase of the planes itself. But he said that between now and 1993, when the first plane is delivered, other arrangements for financing might be made. Another possibility, he said, is having the planes purchased by a third party, which would lease them to Texas Air, he said.

Texas Air said it placed firm orders for 20 of the Airbus planes and took options on 20 others, which it said was the largest single order so far for the A330 and A340.

Lorenzo said it had not been decided yet which company would make the engines for the planes.

"This is a positive move on the part of Texas Air," said airline analyst Ray Neidl of the New York investment firm of Dillon, Read & Co. "It shows that they have faith in the future. But, also, they have to stay competitive. They have many older aircraft that are reaching obsolescence in the 1990s. And many other airlines have been buying large amounts of planes."

Neidl said it is not surprising that Airbus Industrie has offered to provide the financing. "They do this as a last resort to make sure the deal will go through," he said. "They are probably offering a low rate of interest to get the deal."

The A330 and A340 are two distinct wide-body aircraft within a single program that provides economies of scale in training, scheduling, maintenance and parts. The A330 has two engines, and the longer-range A340 has four.

The A330 will carry about 300 passengers, and the A340 has about 286 seats. Capacity in the A340 is lower because the plane carries two cockpit crews for very long-distance flights and is designed to include a two-bunk crew-rest compartment immediately behind the flight deck for the longest flights. Both planes will provide three classes of service.

Jean Pierson, president of the consortium, which is made up of manufacturers in West Germany, Britain, France and Spain, told reporters that 466 of its five types of planes have now been sold to five North American airlines. He said Airbus had estimated that it eventually would sell a total of 800 A330s and A340s. It already has commitments for half that many and now hopes to sell 1,000.

The two planes are expected to enter service in 1992.

In July, Texas Air ordered 50 Boeing narrow-body 737-300s and took options on another 50 in a deal that could total $2.8 billion.

The A340 has the fuel capacity to enable it to make flights of up to 7,000 miles and the power to use high-altitude airports, making it ideal for use in the Pacific, Latin America and Denver.

Airbus Industrie said the new planes will cost less to operate than competing aircraft and thus will be able to fly profitably with smaller passenger loads.

Airbus said the A340 offers seat-mile costs equal to that of Boeing's much larger new 747-400. It said the 747-400, the first of which Boeing delivered a few months ago, burns about 75% more fuel to carry 50% more passengers than the A330 and A340. A McDonnell Douglas MD-11 burns 22% more fuel than the A330 and 14% more than the A340, the European company said.

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