Singapore Air Sets $7.35 Bln Boeing Order
Wed Aug 25, 2004 04:37 PM ET
By Katherine Espina and Kathy Fieweger
SINGAPORE/CHICAGO (Reuters) - Singapore Airlines Ltd. (SIAL.SI: Quote, Profile, Research) plans to buy up to 31 Boeing Co. (BA.N: Quote, Profile, Research) long-range 777-300ER planes worth about $7.35 billion, the carrier said on Wednesday.
The order from Asia's most profitable airline is a big win for Chicago-based Boeing, whose deliveries of commercial jets slipped below those of rival Airbus for the first time last year.
Boeing, whose shares on Wednesday rose to the highest level since before the Sept. 11 attacks, recently lost out to Airbus on a multibillion-dollar order from Virgin Atlantic Airways (VA.UL: Quote, Profile, Research) .
"The relatively large size of the order, combined with the source of the order being Singapore Airlines, which we consider an intelligent and financially strong aircraft buyer, sends a favorable signal regarding the outlook for air travel growth in Asia in years ahead," said Credit Suisse First Boston analyst Jim Higgins.
The 777-300ER aircraft will be powered by engines from General Electric Co. (GE.N: Quote, Profile, Research) , Singapore Air said. It said 18 planes will be ordered for delivery between 2006 and 2010, and the rest will be subject to the exercise of purchase rights.
The potential value of the engine order for the first 18 aircraft is more than $800 million, according to GE Aircraft Engines of Evendale, Ohio. The new GE90-115B engine, which entered service earlier this year, powers the 777-ER.
Rolls-Royce Group Plc. (RR.L: Quote, Profile, Research) supplies engines for Singapore Air's other 777s but does not offer an engine for the 777-300ER, a heavyweight version.
Singapore Air, known for its young fleet and premium service, asked airframe manufacturers Boeing and Airbus (EAD.DE: Quote, Profile, Research) (EAD.PA: Quote, Profile, Research) in February to tender for an order.
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The 777-300ER is the world's largest twin-jet, offering low maintenance by having just two enormous engines but long range and almost the seating capacity of the four-engine Boeing 747-400 jumbo. It competes with Airbus's A340-600.
"With its use of new-generation avionics and materials, and its higher operating efficiency, the B777-300ER will deliver lower operating costs," said Singapore Air Chief Executive Officer Chew Choon Seng.
The order will allow the airline to achieve capacity growth of 4 percent to 6 percent a year, the company said. It would cover the medium- and long-haul needs of the 57 percent government-owned airline over coming years.
Singapore Air, Boeing's largest customer for the 777 aircraft, has a fleet of 89 planes, including 55 Boeing 777s, 29 Boeing 747s and five Airbus A340-500s, with firm orders for an additional four B777s.
The airline also has 10 of Airbus's colossal 555-seat A380s on order, and plans in the spring of 2006 to become the world's first carrier to fly the plane.
Chew said the evaluation process had been comprehensive and the competition between Airbus and Boeing for the order had been very keen.
He said the Boeing deal would be financed largely from internal cash flows, but the airline might consider options such as leasing or debt financing if terms were attractive.
The carrier also said it had decided not to place new orders for regional aircraft despite asking for proposals from manufacturers earlier.
It said the airframe makers have offered the Airbus A330-200 and the new Boeing 7E7 for evaluation but the proposals did not meet the carrier's financial criteria.
Airbus is co-owned by European aerospace company EADS and Britain's BAE Systems (BA.L: Quote, Profile, Research) .
Boeing shares were up $1.59 or 3.12 percent at $52.50 on the New York Stock Exchange.