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The Seattle Times: Airbus customer turns to Boeing with billion-dollar 777 order

Airbus customer turns to Boeing with billion-dollar 777 order

By Dominic Gates

Seattle Times aerospace reporter

In a deal whose significance goes beyond money, Airbus’ largest customer in Latin America, TAM Airlines of Brazil, has for the first time placed an order with Boeing.

TAM ordered four 777-300ERs, worth just over $1 billion at list prices, with options for four more.

The order, another big vote in favor of the 777 over its Airbus A340 rival, opens up for Boeing a customer that had previously bought large jets only from Airbus.

And although TAM already has a firm order for the forthcoming A350 mid-size twin-jet, choosing the 777 as its large twin-jet aircraft means TAM is unlikely to take a planned bigger version of the A350.

Boeing won the order on more than the merits of its 777, however.

TAM needed some mid-size widebodies right away, since just last week it was granted rights by the Brazilian aviation authorities to fly additional routes into Europe, and those rights have to be exercised within six months or lost.

Boeing had available some used airplanes that will fly until the 777s are delivered in mid-2008, and that sealed the win.

"It is very important to be on time to market," said TAM chief executive Marco Antonio Bologna in a conference call from Seattle with Brazilian and U.S. journalists. "Boeing gave us a complete solution."

Boeing Capital, the company’s airplane financing unit, was able to supply TAM three used MD-11 aircraft on a short-term lease.

Industry analyst Scott Hamilton of Leeham.net said this immediate need made TAM "a target of opportunity" for Boeing, giving the sales team a win with long-term implications.

"Once Boeing is in there with the 777, it’ll be a long time before TAM would change" to other similar-size aircraft, Hamilton said.

Bologna insisted in the conference call that the Boeing order doesn’t mean TAM intends to cancel its A350 order, although he left slightly open the possibility of a switch to the 787.

Airbus is expected to announce later this month the formal launch of the A350, with updated detail on its plans. Some observers doubt the European company’s capacity to deliver the plane on time, given that it must sort out its huge delays on the A380 superjumbo program. The A350 is already four years behind the 787.

But Bologna said he’s waiting to hear what Airbus will announce.

"We have an (A350) agreement signed, in our case for the (300-seater) A350-900," he said, "It’s a different configuration to the (365-seater) 777-300ER. So we can continue to have both if necessary. Or we can do the 787 as well."

However, the proposed largest version of the A350 announced at Farnborough, the A350-1000, is the same size as the 777-300ER and so TAM’s order of the Boeing plane closes off one likely sales opportunity for the new Airbus jet.

And the TAM order certainly cements a growing Boeing hold on this segment of the current large jet market, where the twin-engined 777 has almost killed the four-engined and therefore less fuel-efficient A340.

On Saturday, Emirates of Dubai canceled an order for 10 of the A340s and said it would switch to 777s.

In the narrowbody segment, TAM currently flies a fleet of 59 Airbus A320s, with 56 more on order.

In the widebody segment, in additon to the A350s on order, it operates 10 A330 mid-size jets, with six more on order.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

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