Boeing seeking prize US Airways order


Corn Field
Nov 11, 2003
Boeing seeking prize US Airways order
Boeing's 787, 737 still in running

COPENHAGEN, Denmark -- The Boeing Co.'s 787 Dreamliner and its newest 737 still have a good shot at winning what could be the year's most prized jetliner order.

That was the word Monday from a top executive of US Airways, which is expected to decide in a matter of weeks whether to stick with Airbus or turn to Boeing for what could be an order for as many as 80 to 90 widebody and single-aisle planes.

"The analysis continues," said Andrew Nocella, the senior vice president of planning for US Airways who has been close to the negotiations with Boeing and Airbus.

"It has turned out to be far more complicated than we had thought going into this," Nocella said in an interview in Copenhagen, where executives of the Star Alliance airlines, including US Airways, met over the past two days. The world's oldest and largest alliance of airlines was celebrating its 10th anniversary.

Nocella was a birthday party substitute for US Airways Chief Executive Doug Parker, who remained in the United States to prepare for Tuesday's annual shareholders meeting at the Radisson Plaza-Warwick Hotel in Philadelphia.

The industry is closely watching the much-anticipated decision by US Airways. It is considered crucial for Airbus and its A350. After a late start, the Airbus jet lags far behind the 787 in sales. The A350 needs traction, and Airbus is still searching for a U.S. customer for the plane.

US Airways has been an important customer for Airbus, and losing the A350 competition to Boeing's 787 would be another tough blow for Airbus at a time when it is trying to regain its swagger and footing after a costly two-year delay in delivering the A380 to customers.

Nocella acknowledged that some other airlines probably are waiting on the sidelines to see what US Airways does before deciding for themselves whether to order the A350 or 787 Dreamliner.

The US Airways decision is likely to be made before the Paris Air Show, which begins in mid-June, Nocella said. But he said an announcement probably would not come until all the paperwork had been signed and the order is firm, and he was not sure how long that might take.

"But I would hope by the air show we could have an announcement," he said.

A recent report in The Wall Street Journal quoted unidentified sources familiar with the US Airways campaign as saying the airline is leaning toward Airbus. The Journal said Airbus is offering favorable terms on pricing and had agreed to renegotiate terms on A320s previously ordered by US Airways.

But Nocella said the competition remains up in the air.

"Absolutely," he said when asked if Boeing and the 787 are still in the running.

"The Dreamliner is a plane we can see and touch very, very soon," he said. "The A350 is a fresh design that will have a few advantages because of the five years of extra development time."

Boeing plans to complete assembly of the first 787 with a factory celebration in Everett on July 8. First flight will follow in late July or early August, with the first Dreamliner delivered to All Nippon Airways of Japan in May 2008.

The initial model of the A350 won't be ready for airlines until at least 2013, according to Airbus.

But Boeing has said it is essentially sold out of 787 delivery positions until 2013, though it does have some flexibility.

Nocella said Boeing does not want him to discuss the timing of any 787 deliveries to US Airways.

"Boeing told me if I ever said out loud ..."

Nocella did not finish that thought, but added:

"The deliveries are far off. There is some flexibility and lease availability for earlier dates. But the time gap between the 787 delivery and the first A350 delivery is by the day growing shorter. So the penalty for having to wait decreases over time and is becoming less significant in the decision we are about to make."

Airbus got a late start with development of the A350 after well-regarded airline and industry executives were highly critical of the initial design of the A350, which they said was not good enough to compete against the 787.

In response, Airbus undertook a total redesign of the A350, before offering late last year a plane with a wider fuselage and a mostly composite airframe to match the 787.

But the delay proved costly for Airbus.

The 787 Dreamliner has become the fastest-selling Boeing or Airbus jet ever. Boeing is closing in on 600 orders.

After winning 100 orders for the earlier version of the A350, Airbus has struggled to re-sign those customers for the revised version, or win new orders. One of those early A350 customers, Qatar, is expected to order 80 of the new models at the Paris Air Show.

But the Seattle P-I recently revealed that Qatar is also the mystery customer for 30 787s. Boeing has not identified the customer for those planes.

In 2005, US Airways ordered the earlier version of the A350. As part of that 20-plane deal, US Airways received a $250 million loan from Airbus that helped the airline fund the merger with America West.

Nocella played down the notion that US Airways is thus beholden to Airbus.

"We are looking for the best product," he said. "We have been a big supporter of Airbus, and they have been a big supporter of US Airways. But at this point, we are looking to make the right decision for the next two decades. It is critical that we buy the right aircraft. If you don't, the ramifications are severe. You have to live with the decision for a long time. So we are going to make sure we pick the right aircraft."

Unlike in 2005, US Airways is taking more time to evaluate the newly designed A350 against the 787, Nocella said.

"When we ordered the A350 the first time, the process was not long enough and we did not spend enough time comparing the different products," he said.

"There was an opportunity this time to run a clean-sheet competition between the different products and make sure we absolutely picked the right plane."

The midsize 787 is smaller than the A350, which Airbus is aiming not only at the Dreamliner but Boeing's bigger 777.

Nocella said the A350-1000, which will be close in size to the 360-seat 777-300ER, is too big for US Airways, which is focused on a plane that can carry 250 to 300 passengers.

Boeing's 787-8 and the bigger 787-9 "fall slightly on the smaller side of our requirement" he said, while the Airbus A350- 800 and A350-900 "fall slightly on the larger side."

But he described the 787-8 as a "very attractive airplane given its unique size."

The 787-8 would be a good replacement for the older 767s in the US Airways fleet, he said, while the bigger A350 would be a good replacement for the A330-300s.

"So balancing all these things, and taking into account the cost of operations, is why it is taking so long to make the decision," Nocella said. "The answer is very difficult."

The airline is looking to order not only the A350 or 787, but also single-aisle jets from Boeing or Airbus. Boeing is offering its 737; Airbus, the A320 and A321.

Nocella said he anticipates US Airways will announce the choice of widebody and single-aisle jets at the same time.

Some published reports have said US Airways will order 100 or more planes, but Nocella said the number probably will be 80 to 90.

US Airways currently has a fleet of 19 widebody planes, consisting of 10 older Boeing 767s and nine newer Airbus A330s.Nocella said he expects the pending widebody order to be for around 20 to 30 planes, with the remainder single-aisle planes.

Of the 737 models, the airline favors the new 737-900ER (extended range), Nocella said.

"It has a very good chance," he said, when asked how the 737 stacks up against the single-aisle jets offered by Airbus.

"We have been incredibly impressed with the 737-900ER," he said. "The airplane has very good legs and operating costs."

The 737-900ER (extended range) is the newest model of the 737 developed by Boeing. It only recently earned type certification from the Federal Aviation Administration. The 737 derivative has an extra pair of exit doors to increase the maximum passenger capacity.

Other improvements include a stronger wing to accommodate the 13,500-pound maximum takeoff weight increase.

Optional winglets and auxiliary fuel tanks increase the range of the 737-900ER to 3,200 nautical miles. (5,925 km).

The airplane is certified to carry up to 220 passengers in a single-class configuration.

Indonesia's Lion Air was the launch customer for the 737-900ER with an order in 2005 for 30 airplanes. Other airlines have since ordered more than 100 of the jets.

US Airways has more than 50 older Boeing 737s in its fleet, as well as more than 40 older 757-200s. But US Airways has recently favored Airbus for new single-aisle planes.

That past ordering history does not matter in the current competition, according to Nocella, who said it will be tough to tell one of the airplane makers they have lost.

"Both manufacturers are competing hard for this," he said. "We have been pleased with both efforts and it will be a very, very difficult decision."