LDN - Business

Biggest deal yet for Airbus as Franke ups bet on budget airlines

[November 15, 2017] By Tim Hepher and Alexander Cornwell

DUBAI (Reuters) - Airbus landed its biggest ever airliner deal on Wednesday with an agreement to sell 430 planes worth up to $50 billion to U.S. budget airlines investor Bill Franke.

The preliminary deal for A320neo narrowbody jets was signed at the Dubai Airshow and offers a major boost to Airbus, which has lagged arch rival Boeing <BA.N> in deals this year.

It also ensures veteran sales chief John Leahy retires on a high in the coming months.

But Boeing immediately hit back with a provisional agreement to sell 175 planes to budget airline flydubai. Including options to buy a further 50 planes, that deal could be worth $27 billion at list prices.

The deal between Airbus and Franke's Indigo Partners is the industry's largest ever by number of aircraft.

Indigo plans to supply the A320neo narrowbody jets to four airlines in which it has stakes: Frontier Airlines, Mexico's Volaris, Chilean carrier JetSmart and Hungary's Wizz Air <WIZZ.L>.

Airbus <AIR.PA> said it expected to finalize the transaction with the 80-year-old Franke in the coming weeks. Its shares were up 2.5 percent to 85.59 euros at 1150 GMT.

The agreement, along with flydubai's deal for Boeing's 737 MAX narrowbody jets, underscores how budget carriers are rewriting the industry rule book by combining bargain fares with optional services and upgrades for which passengers pay extra.

According to some delegates at the air show, the deals also suggest airlines are taking advantage of a recent slowdown in demand for new jets to negotiate competitive prices.

[to top of second column]

Bill Franke, Managing Partner of Indigo Partners LLC, attends a news conference at the Dubai Airshow in Dubai, United Arab Emirates November 15, 2017. REUTERS/Satish Kumar

SWAN SONG

The Franke deal marks a dramatic swan-song for Airbus sales chief Leahy, who is due to retire in the coming months after holding the job since 1994.

The 67-year-old has overseen the sale of jets worth $1.7 trillion at list prices and helped engineer a rise in Airbus's market share to a par with Boeing from just 18 percent.

This year, however, Airbus's share of the order tally had dropped to 35 percent prior to the Dubai show, as a rejuvenated Boeing management made advances in Singapore and elsewhere.

Airbus management, meanwhile, is dealing with investigations by British, French and U.S. authorities after the company uncovered inaccuracies in sales documents.

Airbus also aims to sell more of its A380 superjumbo, with main customer Emirates seeking guarantees on keeping production lines open.

"I think both sides will take stock and see if something can be agreed later this year," an industry source told Reuters.

(Reporting by Tim Hepher and Alexander Cornwell; editing by Mark Potter and Jason Neely)

Back to top