FedEx Drops A380 Order, Buys Boeing 777s

FedEx Corp. canceled its order for 10 Airbus A380 jets on Tuesday, the first customer to retract an order for the new jumbo double-decker plane that has been dogged by numerous delays.

The world's largest express transportation company cited Airbus' production delays and said in a statement that its FedEx Express unit has ordered 15 Boeing Co. 777 freighters with a list price of $3.5 billion and taken options on an additional 15.

"The availability and delivery timing of this aircraft, coupled with its attractive payload range and economics, make this choice the best decision for FedEx," said FedEx Chairman and CEO Frederick W. Smith.

Boeing's stock rose more than 3 percent on the news while shares of Airbus parent European Aeronautic Defense & Space Co. slumped in European trading.

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

The European plane maker recently doubled its estimate of production delays for the A380 jet to two years. To streamline production, Airbus announced Monday that it will slash the number of suppliers it uses from 3,000 to 500.

Boeing said delivery of its aircraft to FedEx Express will begin in 2009.

"We're looking forward to working with FedEx on this new chapter in our relationship," said Ray Conner, vice president of sales for the Americas for Boeing Commercial Airplanes.

Airbus shocked investors and customers in June by doubling the 555-seater A380's production delay to one year, blaming problems with wiring. But in early October, it doubled the holdup again to a total of two years and said the delay would cost it $6 billion in lost profits of its parent company, EADS, over four years.

Emirates, which has ordered 45 of the A380s and is the program's largest customer, said last month it would send a team of technicians to France to assess the accuracy of promised delivery dates for the A380 superjumbo.

Virgin Atlantic Airways also said last month it would defer the delivery of the first of its six Airbus A380 superjumbo jets until 2013.

Airbus had previously taken a total of 167 firm orders for the A380, including an eight-plane order from Qantas Airways Ltd. announced last month.

FedEx said it did not expect the shift in aircraft buys to adversely affect its operations. The company relies on such big planes with their large payloads for its international flights.

Lane said the Boeing Co. 777s will carry slightly smaller payloads that Airbus 380s.

"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," said spokesman Maury Lane at the company's headquarters in Memphis, Tenn.

FedEx expects to get four of the 777s in 2009, eight in 2010 and the rest the following year.

Boeing spokesman Bob Saling declined to say how far out it has booked orders for the 777, saying only that it had some positions available in 2009 that it was able to make available to FedEx.

Boeing will assemble the freighter version of the 777 on the same production line, in Everett, north of Seattle, as the passenger version of the airplane.

Saling said the company is constantly evaluating whether to boost production of its airplanes but that he didn't expect this order to prompt any production increases.

The firm order for the 15 777s is valued at $3.5 billion at list prices, Saling said, although airlines often can negotiate price breaks.

Boeing launched the cargo version of the long-range, twin-engine 777 in mid-2005, after winning an order from Air France.

Shares in EADS fell 3 percent Tuesday to euro20.66 ($26.26) in Paris. FedEx shares rose 68 cents to $114.62 in afternoon trading on the New York Stock Exchange, where Boeing shares gained $2.73, or 3.4 percent, to $83.21.

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

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On the Net:

FedEx Corp. http://www.fedex.com


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