By Bryce Elder December 14, 2005

The US jet maker gains more ground over arch rival Airbus by winning a fleet upgrade deal with Australia's national carrier worth up to $18 billion

Boeing has scored a key victory in the battle to supply the next generation of fuel-efficient airliners by winning an multi-billion dollar contract from Qantas.

The Australian flag carrier ordered up to 115 of Boeing's mid-sized Dreamliner 787 planes. It was the largest contract of its type to be awarded this year.

The deal, worth up to US$18 billion (around £10bn), represents the biggest victory so far for Boeing's Dreamliner, which is designed to carry up to 300 passengers and use about a fifth less fuel than other planes in its class.

It was also a snub to Airbus, the European company that has overtaken Boeing as the world’s leading commercial aircraft maker.

The two aircraft markets have been battling for orders in the Asia Pacific region, where carriers are boosting capacity and upgrading fleets to cope with increased demand for air travel.

Boeing has had the upper hand so far: the group won a total of 800 orders worldwide to the end of last month, according to its website. Airbus's website revealed it had 494 as of October 31, although this does not include a $10 billion deal to supply 150 narrow-body aircraft to China.

The contract with Qantas had been considered by industry experts to be too close to call, given the Sydney-based carrier had favoured Airbus jets in recent deals. Its no-frills brand, Jetstar Airways, will use some of the Dreamliners having previously operated an all-Airbus fleet.

It leaves Airbus's A350 airline yet to win a single order from a major national carrier. Its biggest contract so far is from Qatar Airways, for up to 60 planes.
However, Airbus's majority owner said the company's management remained confident of winning more customers.

"We have 164 firm orders for the A350 so far and we will increase this significantly again by year-end," Thomas Enders, co-head of defence company EADS, which owns of four-fifths of Airbus. He declined to repeat an earlier target for 200 orders for A350s this year, saying only that management "is working on it."

Analysts believe Boeing may have won the advantage over Airbus because it was able to promise delivery of the airlines two years earlier than its rival.
The initial deal with Qantas is to supply 45 jets starting 2008, with options over a futher 20 and purchase rights on 50 more running through to 2012. The first A350s are not scheduled roll out of the hangar until 2010.

Dreamliner's greater versatility may also have helped, according to Robert Stallard, an analyst at Bank of America. The Boeing plane's "ability to perform domestic, regional and long-haul trips as opposed to the A350's strength in medium-capacity, long-haul sectors was a strong contributory factor," he said.
The next round of the battle between the companies will take place early next year, when Singapore Airlines will decide where it is placing an order for up to 70 wide-body jets. Such a deal would be worth $10 billion at list prices.

According to industry experts, a Boeing victory with Singapore Airlines could further damage Airbus by leaving its A350 jet lacking sufficient scale to compete. They noted that Emirates airlines is currently stalling over a deal to use A350s for a scheduled fleet replacement due to take place at the end of the decade.

"Airbus sorely needs a bona fide airline customer to enhance the A350 image. At this stage, Airbus certainly faces a dilemma," wrote Steve Binder, an analyst at Bear Stearns, in a note to clients.

Airbus is 80 per cent owned by EADS, with Britain’s BAE Systems owning a fifth of the group.

Source: TimesOnline