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Lufthansa Is About to Spend $14 Billion on New Airplanes

Sep 14, 2013 2:00 am

Skift Take

Southwest and Lufthansa are two very, very different airlines. One, for instance, flies one type of aircraft and has been profitable for over two decades. The other flies lots of different kinds of planes as it tries to do everything yet loses money much of the time. That one is called Lufthansa.

— Jason Clampet

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BriYYZ  / Flickr

A Lufthansa Airbus A340-600. BriYYZ / Flickr


Deutsche Lufthansa AG will split an order for about 50 wide-body aircraft between Airbus SAS and Boeing Co., a purchase with a list value of at least $14 billion, people with knowledge of the matter said.

The twin-engine jets will be Boeing’s 777-9X, which is due to fly by decade’s end, and Airbus’s A350-900, said two of the people, who asked not to be identified because the details aren’t yet public. The order, which would be the first for the 777-9X, may be announced as soon as next week, the people said.

Dividing the deal ensures that both planemakers get a boost after Cologne, Germany-based Lufthansa had said the order would be a winner-take-all contest. One of the people said Boeing jets will account for most of the sale, which would expand the U.S. company’s reach at a carrier that has relied heavily on models from Toulouse, France-based Airbus.

“They were almost the only airline of note without a 777,” said Richard Aboulafia, aerospace analyst with Teal Group, a consultant based in Fairfax, Virginia. With the 777X, Lufthansa gains “a very promising jet, a very promising design. It’s going to get a lot of commercial enthusiasm.”

Lufthansa, Europe’s second-largest carrier, hasn’t bought 777s for its own main jet operations before, instead acquiring the freighter variant and using the passenger version at its Swiss International Air Lines unit.

Board Decision

“No fleet decision has yet been taken by the Lufthansa supervisory board,” Thomas Jachnow, a Lufthansa spokesman, said yesterday by telephone. Any announcement will follow the board’s approval of management’s fleet recommendation, he said.

Stefan Schaffrath, an Airbus spokesman, and Doug Alder of Chicago-based Boeing declined to comment.

Boeing rose 1.4 percent to $111.3 in New York yesterday. Airbus parent European Aeronautic Defence & Space Co. fell 1 percent to 44.81 euros in Paris, while Lufthansa slid 0.1 percent to 13.94 euros in Frankfurt.

Lufthansa now flies some long-haul routes with four-engine Airbus A340-300s and A340-600s, a fuel-guzzling plane that Airbus stopped making as demand dried up. The carrier ordered 108 planes in May, including 100 Airbus A320 narrow-bodies, in a transaction with a catalog value of about $12.4 billion. Airlines typically buy at a discount.

The wide-body order will surpass the May purchase and be Lufthansa’s largest ever, according to a person familiar with the matter, who asked not to be identified because the purchase hasn’t been announced.

Order Mix

A precise deal value couldn’t immediately be determined, because of the lack of specifics on which planes are in the order and on what Boeing will charge for 777X once the board gives final approval to build it. The updated version will be bigger and cost more than the 777, whose largest variant lists for $320.2 million. Airbus offers the A350-900 for $287.7 million.

The next 777, the world’s biggest twin-engine airliner, will feature new engines on the upgraded model and the largest wing ever on a Boeing plane to help improve performance. The version Lufthansa is buying will seat as many as 400 people, which means it probably won’t add more four-engine 747-8 jumbo jets, Aboulafia said.

The German airline ordered 19 of those planes, Boeing’s most-expensive current passenger model with a list price of $356.9 million, according to the planemaker’s website.

Lufthansa is increasingly focusing on long-haul operations as it shifts much of its European and domestic flying to low- cost subsidiary Germanwings as the airline also seeks to shed about 3,500 jobs. The carrier reported second-quarter operating profit of 438 million euros ($538 million).

With the new order, the German carrier is following Air France-KLM and International Consolidated Airlines Group SA, which have already placed large wide-body commitments with Airbus and Boeing. IAG unit British Airways began regular service with Boeing 787s this month as part of a fleet overhaul that will also involve A350s from Airbus.

With assistance from Tim Catts in New York and Andrea Rothman in Toulouse. Editors: Ed Dufner, John Lear. To contact the reporters on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net; Julie Johnsson in Chicago at jjohnsson@bloomberg.net; Robert Wall in London at rwall6@bloomberg.net. To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net; Ed Dufner at edufner@bloomberg.net. 

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