Airbus Loses A380 Customer As FedEx Switches to Boeing

FedEx has made the first cancellation for the program, now two years behind schedule.


FedEx Corp. canceled its order for 10 Airbus A380 freighters and ordered Boeing planes instead, dealing a new blow to the European aircraft maker whose flagship double-decker jet has been hit by costly delays.

The U.S.-based delivery company on Tuesday announced an order for 15 Boeing Co. 777 freighters worth US$3.5 billion at catalog prices, blaming the A380 holdups for its decision - the first cancellation for the program, now two years behind schedule.

Shares of Airbus parent European Aeronautic Defence and Space Co. dipped sharply to end 3.1 percent lower at euro20.66 (US$26.24) in Paris. Boeing's stock rose 3.9 percent to US$83.60 (euro65.82) in New York.

FedEx Chairman and CEO Frederick W. Smith said the switch to the 777 was a "necessary and prudent" move in the face of fast-growing global demand for air cargo and express delivery services.

"The availability and delivery timing of this aircraft, coupled with its attractive payload range and economics, make this choice the best decision for FedEx," Smith said. The company is scheduled to take delivery of all 15 Boeing jets in 2009-2011 and has options on an additional 15.

The A380 cancellations leave just 15 superjumbo freighter orders on the Airbus books - from United Parcel Service Inc. and International Lease Finance Corp. - and a further 142 orders for the plane's passenger version.

"Airbus regrets the decision made by FedEx," spokeswoman Barbara Kracht said, "but we understand their need to urgently address their capacity growth."

EADS, the parent company of Airbus that is scheduled to publish third-quarter results on Wednesday, is already facing a financial crunch as it struggles to line up funding for the mid-sized A350 jet program - Airbus' belated answer to Boeing's twin-engined, fuel-efficient 787.

Airbus announced plans Monday to slash the number of suppliers it uses to 500 from the current 3,000, as part of a previously announced cost-cutting drive to generate euro2 billion (US$2.5 billion) in annual savings by 2010. Thousands of job cuts are also expected.

The Toulouse, France-based jetmaker shocked investors and customers in June by announcing a second six-month delay to the A380 program - then doubled the holdup again in October. EADS warned that the overall two-year delay will wipe an estimated euro4.8 billion (US$6 billion) off profits over the next four years.

In response, Virgin Atlantic Airways deferred delivery of the first of its A380s until 2013 and Emirates, the program's biggest customer with 45 planes on order, announced it was sending an audit team to France to make sure Airbus was able to stick to the latest delivery schedule. But Australia's Qantas Airways Ltd. increased its A380 order to 20 planes from 12.

Airbus has been negotiating confidential compensation deals with airlines as it fought - successfully, until now - to keep its A380 customers on board.

"I think they're running out of what they can give, and I think patience is running out on the customer side," said Chris Lozier, an analyst with U.S.-based Morningstar.

The boost to Boeing's stock has more to do with the A380's "dire straits" than with the 777 order, Lozier said.

The Boeing freighter - launched in mid-2005 with an order from Air France - carries a smaller payload than the A380. But FedEx said the switch would not adversely affect its operations.

"There are different capacities, but we believe that we have created advantages in more nonstop, point-to-point transoceanic routes that have shorter flight times but improved service offerings to FedEx customers," company spokesman Maury Lane said.

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AP Business Writers Allison Linn in Seattle and Woody Baird in Memphis, Tennessee, contributed to this report.

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On the Net:

http://www.fedex.com

http://www.airbus.com

http://www.boeing.com/


Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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