=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2004/12/22/f= inancial1720EST0293.DTL --------------------------------------------------------------------- Wednesday, December 22, 2004 (AP) Boeing's order from Japan Airlines is one victory in battle with Airbus BRAD FOSS, AP Business Writer (12-22) 14:20 PST (AP) -- A day after European aircraft maker Airbus SAS landed its first 10 orders for the A350, a wide-body plane that will compete directly with Boeing Co.'s new 7E7 Dreamliner passenger jet, its U.S. rival delivered a rapid counterpunch by selling 30 7E7s. Analysts said the $4 billion deal reached Wednesday between Boeing and Japan Airlines Corp., Asia's largest carrier in revenue terms, represents an important, though modest victory for Boeing in its mounting trans-Atlantic rivalry. But refusing to cede even the slightest public relations edge, Airbus announced later on Wednesday that a new Kuwaiti airline, Jazeera Airways, had ordered four Airbus A320s, narrow-body aircraft that compete with Boeing's 737. Still, Boeing rightfully laid claim to the deal du jour and investors seemed to agree. Shares of the Chicago-based company rose 49 cents Wednesday to $53.91 on the New York Stock Exchange, close to their 52-week high of $55.48. "It matters a lot, if only to reverse the perception that Airbus regained an unbeatable initiative on the sales front" when it locked in a $2 billion order on Tuesday from Spain's Air Europa for 10 A350s, a plane that has only been marketed for about two weeks, said Richard Aboulafia, an analyst at Teal Group Corp., a Fairfax, Va.-based aerospace consultancy. Aboulafia said the order from JAL, which has the option to buy 20 more, "could break the logjam" at Boeing, whose only other major order for the 7E7 came in April when All Nippon Airways Co. of Japan, known as ANA, purchased 50 of the fuel-efficient planes in a deal worth about $6 billion. The two-aisle 7E7, which will seat between 217 and 289 passengers, is scheduled to begin service in 2008. A key factor behind Boeing's dominance in Japan is that several of the country's heavy machinery makers are helping develop the 7E7. Denver-based aviation consultant Michael Boyd called the marketing of the A350, which won't be available until 2010, a "desperation" move by Airbus to prevent existing customers from switching to Boeing's 7E7, which is more fuel efficient than Airbus' existing mid-sized plane, the A330. "If they (Airbus) can knock out the 7E7, Boeing might as well start maki= ng rockets again because they're not going to be in the airline business for very long," said Boyd. That said, Boyd believes the JAL deal clearly gives Boeing the upper han= d, and that Airbus' much smaller agreements with Air Europa and Jazeera Airways are nothing more than defensive moves by a carrier desperate "to make some noise." Airbus did not immediately return a call seeking comment. Other analysts described the A350 as a much more serious threat, particularly if Airbus decides to undercut the 7E7 on price in order to maintain -- and possibly gain -- market share. It is not clear yet whether European Aeronautic Defence & Space Co., whi= ch owns a majority stake in Airbus, will apply for development aid from the European Union for the A350 project. If it does, the U.S. government could decide to put its weight behind Boeing. Both airlines have filed claims with the World Trade Organization over what each says is unfair government subsidies for the other. Still, with the bulk of the U.S. aviation industry in financial tatters and no major aircraft purchases expected soon from Europe's largest carriers, analysts say Asia and, to a lesser extent, the Middle East will be the true battlegrounds for Boeing and Airbus over the next few years. Boeing's stated goal was to sell 200 Dreamliners by the end of 2004. The JAL deal brings the number of officially announced orders to 112. Only half of those are firm orders. Boeing Commercial Airlines spokesman Bob Saling said the company will announce more orders from other airlines by Dec. 31, though Merrill Lynch aircraft analyst Byron K. Callan said "I don't think people are going to be sweating bullets" if the company falls short of its immediate target. "The bigger issue is how does this all play out in 2005 and 2006," Callan said. Big aircraft orders could come from any number of carriers in China, Sou= th Korea, India and the Middle East, Callan said, but the one airline Wall Street is paying closest attention to is Singapore Airlines Ltd., which now operates Boeing and Airbus planes. "When they make a decision, it will be based on full-blown proposals from Boeing and Airbus. That will be a very important litmus test as to how this competition for these two airplane types goes forward," Callan said. Aboulafia called the Singapore decision "as close to an international level playing ground" as there is because of the carrier's global reputation for choosing what it believes to be the best equipment available, without regard to political factors. By contrast, any orders for Boeing aircraft made by China's rapidly growing airlines may not be viewed with the same sense of fairness, given the United States' ballooning trade deficit with Beijing. "You could have some diplomatic pressure" placed on China by the United States, said Jon Ash, president InterVISTAS-ga2, a Washington-based aviation consulting firm. JAL said Wednesday it has an option to order 20 more of both the long-range 7E7-8 and the short-to-medium-range 7E7-3. While the value of the deal was not disclosed, a JAL spokesman said the catalog price for 30 7E7 jets is upwards of $4 billion. If all options are exercised, the total price would be about $6 billion, but airlines typically negotiate big discounts on major orders. The 7E7s will replace JAL's medium-size jet fleet beginning in 2008, including 36 Boeing B767 jets, and 22 A300-600s from Airbus. Associated Press writers Yuri Kageyama in Tokyo and Tim Klass in Seattle contributed to this report. Brad Foss reported from Washington. ---------------------------------------------------------------------- Copyright 2004 AP