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Airbus Wins ILFC Order for Up to 30 Jets

Aerospace: Deal with L.A. leasing firm, which may fetch more than $1 billion, could deal a blow to Boeing.

November 18, 1998| From Bloomberg News

Airbus Industrie won an order from Los Angeles-based International Lease Finance Corp. for as many as 30 A-318 jets valued at $1.1 billion, paving the way for the European airplane maker to start making the 100-seat aircraft early next year.

The commitment from the world's second-biggest plane lessor is a potential blow to Boeing Co., which is struggling to win orders for its own 100-seater, the 717. A bulk purchase from a lessor like ILFC can jump-start jet programs and sway decisions at other airlines. ILFC is Airbus' single-largest customer.

It's still possible that ILFC will buy the 717 if the Los Angeles-based company maintains its practice of splitting orders between the world's two large airplane makers. But analysts said the order doesn't bode well for Boeing, which has been resisting ILFC's demands for deep price cuts.

"It's a fairly pricey aircraft for its size--that's undoubtedly part of it," said Paul Nisbet, an aerospace analyst with JSA Research Inc.

Boeing shares closed unchanged at $42.75 on the New York Stock Exchange.

The A-318 has a list price of $36 million, though ILFC probably secured a sizable discount. John Plueger, ILFC's chief operating officer, had said he wouldn't pay more than $20 million for the 717, which is listed at $30.5 million to $34.5 million.

Toulouse, France-based Airbus said in September that it would offer the A-318 to challenge the 717, a derivative of the McDonnell Douglas DC-9. Boeing inherited the jet, once known as the MD-95, in the takeover of its former rival last year.

The small jet hasn't been as successful as Boeing would like. In three years it's won only 55 firm orders--50 from Airtran Holdings Inc., which was once called ValuJet, and five from a German leasing company.

Getting more 717 orders is critical to jobs at the former McDonnell Douglas plant in Long Beach. Boeing executives say they need to make at least 60 of the planes a year to keep open the production line.

Boeing spokesman Fernando Vivanco said it's still in the hunt for further orders from ILFC and others. He said Boeing expects to announce more 717 orders by year's end.

ILFC is a unit of American International Group Inc., the biggest publicly owned insurer in the U.S. Its shares gained $1 to close at $89 on the New York Stock Exchange. It has ordered more than 280 Airbus aircraft, which it leases to airlines.

Deliveries of the A-318 are scheduled to begin in 2002.

ILFC signed a memorandum of understanding for the planes. A final sale depends on Airbus getting enough additional orders to formally offer the A-318 and begin production. Airbus said it expects to get them by early next year, later than its initial plan for the end of 1998.

"With an endorsement as strong as ILFC's and the keen interest expressed by several airlines around the world, we feel confident that our program is obtaining the market acceptance we expected," said John Leahy, senior vice president for commercial sales at Airbus.

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