Saturday, June 15, 2024

Korean Air snubs embattled Boeing—its top aircraft supplier—as it inks $14 billion deal with Airbus

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Korean Air Lines Co. passed over embattled Boeing Co. — typically the carrier’s top aircraft supplier — to order 33 Airbus SE A350 wide-body jets in a $14 billion deal as it seeks to streamline its fleet ahead of a merger with Asiana Airlines Inc.

The order will see the Seoul-based carrier buy 27 of Airbus’s largest twin-aisle jet, the A350-1000, and six smaller A350-900s, which it selected over Boeing’s yet-to-be-certified 777X. Bloomberg News previously reported Korean Air was on track to announce a significant deal as soon as this week for at least 20 A350 jets.

“The procurement of the next-generation, eco-friendly A350 is not only aligned with the airline’s sustainability efforts, but also is seen as preparation for the integration of Asiana Airlines,” Korean Air said in a statement Thursday. The 18.5 trillion won ($14 billion) deal is before customary discounts.

Demand for larger jets, bullish bets on travel growth and strains on planemakers’ ability to meet demand for single-aisle aircraft this decade is fueling a surge in wide-body orders. Korean Air is also looking to simplify its fleet and reduce costs ahead of its merger with smaller rival Asiana. The tie up just needs regulatory approval in the US.

Airbus also scored another victory on Thursday with Japan Airlines Co. buying 42 jets, picking 21 A350-900s and 11 A321neos, while Boeing scored a consolation order of 10 787-9s.

The merger with Asiana is set to bring Korean Air a significant number of modern, and sought-after, Airbus jets. The airline doesn’t operate the A350 but Asiana does — with 15 in its fleet and a further 15 on order. Both carriers are flying nine relatively new A321neos each and have a combined backlog of 57 of Airbus’s largest narrow-body jets. Bloomberg previously reported that Korean Air is interested in adding more A321neos.

Korean Air had almost 160 aircraft as of Dec. 31, according to its most recent financial filing, and around 100 on backlog. The carrier is also mulling jettisoning its fleet of 10 Airbus A220s, its smallest jet, Bloomberg reported last month.

The order is a boost for Airbus as its A350-1000 jet picks up its 10th new operator in 12 months — among them Delta Air Lines Inc., which has a 14.9% stake in Korean Air’s parent Hanjin KAL Corp. The series of deals helps counter the loss of some wide-body campaigns due to engine maker Rolls-Royce Holdings Plc’s stance on tougher pricing

Meanwhile, rival Boeing faces increased scrutiny of the safety of its jets following several recent incidents.

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