* In rare move, Boeing agrees to buy Airbus jets to ease 777
sale
* Airbus due to buy the other half of China Eastern’s A340
fleet
* Two trade-in deals illustrate fierce competition for jet
orders
* Expert sees “difficult” second-hand market for Airbus A340
jets
By Tim Hepher and Donny Kwok
April 30 (Reuters) – Boeing may soon be looking for
buyers for long-range passenger jets built by arch-rival Airbus
under a rare trade-in deal with China’s third largest
airline that underscores all-out competition between the
planemakers.
The U.S. planemaker has agreed to buy half of China
Eastern’s fleet of 10 Airbus A340 jets as
part of a $6 billion deal to sell 20 Boeing 777s to the airline,
the Shanghai carrier said in a stock exchange filing on Monday.
Airbus has itself agreed to take back the other half of
China Eastern’s A340 fleet as part of a separate deal to sell 15
A330 jets, but faces likely delays in getting the deal done due
to a row between China and Europe over emissions.
The two deals lift a veil on an obscure corner of the
jetliner industry, where planes are traded in like used cars.
Just like car dealerships, the world’s dominant aircraft
manufacturers sometimes offer to take back their old models when
trying to persuade airlines to upgrade to the latest models, in
an industry with $100 billion in annual new sales.
But experts agree it is unusual for aircraft to cross over
the barrier separating Airbus and Boeing in their combative
duopoly, and when they do it stokes up emotions on both sides.
“It sometimes happens but it is not their preferred route at
all,” said Karl Bruenjes, managing director of UK-based RPK
Capital Management, a specialist in second-hand aircraft.
The deal echoes a move by Boeing to buy A340s from Singapore
Airlines in the mid-1990s including some still in assembly. Back
then, the aim was to support a blockbuster sale of 777s. When
delivery came there was a brief spat over whether Airbus would
support the A340s, according to people familiar with the deal.
The subsequent trading spawned a joke inside Boeing
headquarters that Boeing had placed more A340s than Airbus that
year — a source of irritation for Airbus that may be repeated
if Boeing quickly sells the jets it plans to buy this time.
Airbus halted production of the slow-selling A340 last year.
In 1984, according to industry sources and web databases,
Boeing bought a handful of brand-new Airbus A310 models assigned
to Kuwait Airways to allow the airline to take Boeings instead.
In the European camp, in 2008 Air Algerie told the United
States that Airbus had offered to buy its entire Boeing fleet to
prise open a key Boeing client, according to an unconfirmed
account in a cable marked “sensitive” and released by Wikileaks.
Airbus said its policy was not to buy Boeing airplanes.
“It is very rare in this industry that someone buys their
competitor’s aircraft. We do not do it,” sales chief John Leahy
told Reuters.
Boeing said it did not comment on specific transactions, but
a spokesman added: “In general it is fair to say that at times
we do take airplanes in trade, including occasionally non-Boeing
airplanes, as part of our orders transactions.”
DIFFICULT SECOND-HAND MARKET
The A340 entered service boasting “four engines for long
haul” in 1993, shortly before the 777 ushered in an era of two
engines for all but the biggest aircraft or the longest routes.
While the 777 enjoyed record sales last year, Airbus
decided to halt production of the A340, which was outsold four
to one.
China Eastern’s A340 fleet includes five A340-600s, until
recently the world’s longest jetliner and still relatively young
at an average age of 8.3 years.
According to UK consultancy Ascend, the notional market
value of these jets, which are due to be sold to Boeing, is $55
million each, but some dealers called the figure optimistic.
“The A340 is a difficult market and they will be competing
with the manufacturer,” Bruenjes said, noting that Airbus
already has nine A340s on its own list of trade-ins for sale.
“The value will mainly be in the engines, not so much the
airframe. An existing operator might be interested in getting
some at cheap prices, but we wouldn’t pay more than $30 million
each, and that’s if we looked at them at all,” Bruenjes said.
Airbus faces an even tougher task if gets the green light
from Beijing, since its half of the proposed A340 fleet trade-in
is older at roughly 15 years and the model has less range.
Ascend’s market value for those five A340-300 jets is $15
million each, but Bruenjes estimated a seller would be lucky to
get much more than the value of the engines — some $4 million.
The A340 averaged $250 million new at list prices before it
was taken out of production. In practice jetmakers take
trade-ins to facilitate new sales rather than make extensive
profits.
Airbus says a future jet, the carbon-composite A350-1000,
will leapfrog the 777 and wrest back one of the most lucrative
parts of the global airliner market from Boeing. Pending that
jet’s arrival in 2017, the smaller A330 is selling well and the
777 is said to compete on occasions with the much larger A380.
Boeing is considering revamping the 777 to protect its grip
on the 300-400 seat market and try to pre-empt the challenge
from the A350-1000, which is still trying to establish momentum.
