German airline orders 747s

FRANKFURT, Germany - In a blow to Airbus SAS, German airline Lufthansa AG said Wednesday it would order 20 Boeing 747-8 planes, with purchase rights for 20 more, becoming the first airline to order the new long-haul jet for passenger service.

The Cologne-based airline said it would start taking delivery of the wide-body planes in 2010 as it expands into North America and Asia. The airline also approved an order for seven Airbus A340-600 long-haul jets, due for delivery by 2008. The airline, whose 333-plane fleet is dominated by Airbus aircraft, already operates 13 of those planes.

Lufthansa said the order for all the planes had a list value of $6.9 billion; Boeing said its 20 firm orders had a $5.5 billion value at list prices, although customers typically negotiate discounts.

The move was even more striking considering that the parent company of Airbus, European Aeronautic Defence & Space Co., is a joint Franco-German operation.

"Lufthansa is noted for its careful aircraft selection. It must have been somewhat difficult to have made the decision that they did, given Germany's interest in Airbus," said Paul Nisbet, an analyst for Rhode Island-based JSA Research. "But they did it and I think all the major airlines will take notice. And all those that have 747 fleets will take a second look at this."

Lufthansa Chief Executive Wolfgang Mayrhuber said the new order would help it take some older aircraft out of service, making its fleet more efficient by reducing fuel and operating costs. It said the new planes would also produce less emissions.

"Both aircraft types are sustainable investments in ecological efficiency," he said.

However, he also singled out the Boeing model for extra praise.

"With the orders for the highly modern B747-8, Lufthansa is setting standards. The Boeing B747-8 is more than just a derivative of the successful Boeing B747 series," Mayrhuber said.

The announcement was made after the close of the Frankfurt stock exchange. Lufthansa shares earlier closed 1 percent lower at 19.97 euros ($26.51). On the New York Stock Exchange, Boeing shares rose 60 cents, or 1 percent, to $91.33. EADS shares were up 1 percent to close at 23.12 euros ($30.69) in Paris trading.

For Airbus, the order was the latest in a series of strategic missteps.

After concentrating massive resources on its flagship A380 superjumbo, Toulouse, France-based Airbus has been outmaneuvered by Chicago-based Boeing Co.'s two-engine 787, which delivers better fuel economy than older four-engine Airbus jets in the same size category. Higher fuel prices have made the fuel-efficiency argument more persuasive.

The 555-seat A380's overall two-year delay wiped about $6.39 billion from profit forecasts over four years and has forced Airbus to consider basing assembly work on new models at a single site, rather than splitting it among several countries.

Lufthansa ordered 15 A380s in December 2001, but does not expect to take delivery of the first plane until December 2009.

Lufthansa has a variety of Boeing and Airbus planes in its fleet, including 92 Boeing 737s and 747s; 143 Airbus A300s, A330s, A340s, A319s, A320s and A321s. It also operates Avro regional jets, Canadair regional jets and 19 MD11Fs in its cargo fleet.

For Boeing, the order represents a vote of confidence and could cause other major European flag carriers, such as British Airways and Scandinavian Airline System, to consider the new 747-8.

"I'd call it extremely significant. This is the first indication that there could be a good market for this 747-8, and as such it's very likely to be taking potential orders away from the A380. I can't think of anything that Boeing would like more," said Nisbet.

"By my count, Boeing now has 112 747s in backlog. That's not too many less than what the A380 has. So it could very well be, if we get a follow-through by British Airways or Cathay Pacific or somebody, they could have a bigger backlog than the A380, which would be something that two years ago, if I'd have said the same thing, people would have said I'd lost my mind."

Lufthansa and Boeing downplayed head-to-head competition between the 747-8 and the A380, saying the Boeing jet fills a niche between the 300-seat and 500-seat categories. Boeing says the 747-8 will carry 467 passengers in three classes.

Airbus' delays in producing the A380 also played no part in Lufthansa's orders of the large Boeing jets, Lufthansa senior vice president Nico Buchholz said at a news conference in Seattle, Wash.

"It is a well-evaluated decision for the 747-8, rather than a decision against something else," he said.

A freight version of the 747-8 has received 73 orders, with the first scheduled to be delivered to Cargolux in 2009.