September 19, 2013 / 1:09 AM / 5 years ago

Lufthansa backs major Airbus, Boeing jet order

FRANKFURT (Reuters) - Deutsche Lufthansa (LHAG.DE) signaled a major aircraft order to drive down fuel costs on long routes, saying its board had backed modernization plans that industry watchers expect to benefit both Airbus EAD.PA and Boeing Co (BA.N).

Lufthansa aircrafts sit on the tarmac at Frankfurt airport July 12, 2013. REUTERS/Ralph Orlowski

Germany’s top carrier gave few details after Wednesday’s board decision, but people familiar with the matter said the deal could include $14-15 billion of firm orders split between jetmakers, including the first order for a revamped Boeing 777.

Lufthansa is in the middle of a deep restructuring that includes 3,500 job cuts, while investing in modern jets to cut its fuel bill and catch up with Middle East rivals particularly on highly fought-over routes between Europe and Asia.

Lufthansa said outgoing Chief Executive Christoph Franz would hold a news conference at 11 a.m. local time (0900 GMT) on Thursday in his first public appearance since he announced he was quitting to be chairman of Swiss drugmaker Roche Holding AG ROG.VX.

The influential airline’s decision is keenly awaited as Airbus and Boeing scramble for advantage in the lucrative market for twin-engined jets carrying between 300 and 400 people.

Excluding options, Lufthansa is expected to order up to 45 aircraft, including the first solid order for a revamped version of Boeing’s best-selling twinjet, code-named 777-9X.

Designed to compete with the newer Airbus A350-1000, the upgraded 777-9X aircraft aims to carry 41 more seats while burning less fuel per seat than the existing 365-seat Boeing 777-300ER.


Lufthansa looks set to order up to 34 of the 406-seat 777-9X including firm orders for 20, two people familiar with the matter said.

This is subject to Boeing’s formal decision to build the plane, which its board is expected to approve by year-end followed by entry into service around the end of the decade.

Lufthansa also plans to purchase 20-25 Airbus A350-900 jets, the European manufacturer’s latest model due to enter service in the second half of 2014, people familiar with the matter said.

The combined firm orders for up to 45 jets may be worth $14-15 billion at list prices based on estimated values for the 777-9X, whose new wings and engines are expected to command a premium to existing 777s.

If exercised at a later date, the options — which are not included in published order tallies — could add several billion more dollars. Airlines usually get significant discounts on list prices.

The expected order is a boost for engine manufacturers Rolls-Royce (RR.L) and General Electric (GE.N), which power the A350 and the latest versions of the 777, respectively.

Lufthansa has a mixed fleet dominated by Airbus and Boeing jets. Its core German brand does not yet fly passenger 777s.

Besides voting on the fleet plans, Wednesday’s supervisory board meeting was expected to discuss potential candidates to succeed 53-year-old CEO Franz, whose surprise departure comes at a critical juncture of the group’s restructuring program.

Under Franz, Lufthansa has pushed through a cost-cutting program now in its second year to boost operating profit to 2.3 billion euros in 2015 from 524 million euros in 2011, and partly fund investments in modern planes and new cabin products.

In March, Lufthansa confirmed an order for 100 Airbus short-haul jets worth $10 billion at list prices.

The latest move to reduce fuel costs by updating Lufthansa’s fleet came as rival Air France (AIRF.PA) provided further evidence of the malaise gripping former state-owned European airlines by announcing 2,800 fresh job cuts.

Reporting by Marilyn Gerlach, Tim Hepher, Alwyn Scott; Editing by Maria Sheahan, David Evans and Edwina Gibbs

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