Boeing Said to Win $8.4 Billion United Order for 100 Jets

Boeing Co. is set to win an order this week from United Continental Holdings Inc. (UAL) for 100 of the planemaker’s 737 jets in a transaction that may be valued at about $8.4 billion, people familiar with the matter said.

The accord includes options for as many as 100 more jets and will be announced July 12 in Chicago, where both companies are based, said two of the people, who asked not to be identified because details aren’t public. The order will include the upgraded 737 Max model, the people said.

A deal later this week would be a boost for Boeing as it promotes the Max at the Farnborough International Air Show outside London. The company wasn’t offering the jet at the June 2011 expo in Paris, where Airbus SAS routed Boeing with sales and commitments for its revamped single-aisle A320neo.

“It’s one of many positives for Boeing,” said Ray Neidl, a Maxim Group LLC analyst who covers Boeing and United. “We all knew for a long time the airlines were starving for a more fuel-efficient narrowbody. Now that one’s available in the next few years, airlines are falling over themselves to get them.”

Boeing opened the air show today by announcing a $7.2 billion order for 75 single-aisle 737 Max aircraft from Air Lease Corp. (AL), the first such purchase by a lessor. General Electric Co. (GE)’s jet-leasing unit also is poised to purchase 100 737s, people familiar with that transaction said.

Exclusive Supplier

United’s mix of Max jets and current 737s will determine the list value of its order. The 737-8, the top-selling existing model, retails for $84.4 million, and the Max 8, the equivalent new plane, is $95.5 million, according to Boeing’s website.

The order is United’s first since the 2010 merger creating the carrier from former United parent UAL Corp. and Continental Airlines Inc. Boeing was Continental’s exclusive plane supplier for two decades, and the accord deepens ties between the world’s largest airline and the biggest aerospace company.

United declined to comment, said Christen David, a spokeswoman. A Boeing spokesman, Tim Bader, said the company had no comment.

Boeing rose 0.5 percent to $74.03 at the close in New York. United fell 1.4 percent to $23.90, declining along with most carriers in the Bloomberg U.S. Airlines Index. (BUSAIRL)

United held talks over about six months on a possible mixed order of current and new-model 737s and A320s before opting to stay with Boeing, people familiar with those discussions said in April.

Planemaker Competition

The U.S. planemaker is trying to reclaim the top spot in commercial production lost to Airbus in 2003. Toulouse, France-based Airbus had record orders of 1,419 aircraft in 2011, while Boeing’s tally was 805. Airbus won 95 percent of narrow-body sales at the Paris show, and has said 2012 orders may fall by half as an initial flurry of A320neo purchases wanes.

United’s order will make it the last of the four biggest U.S. carriers to announce single-aisle jet purchases in less than a year.

Delta Air Lines Inc. agreed in August to acquire 100 737s, a month after AMR Corp.’s American Airlines split a record order for 460 jets between Boeing and Airbus. Southwest Airlines Co. agreed in December to buy 208 737s in an order that was the first for the Max.

Boeings make up about 78 percent of United’s mainline jets, with the rest made by Airbus. The 555-plane regional fleet is split about evenly between Bombardier Inc. (BBD/B) and Embraer SA. (EMBR3)

United Fleet

Narrow-body jets made up 78 percent, or 545 planes, of United’s 701 mainline planes, according to its latest annual report. Boeing 757-200s are the oldest of United’s single-aisle jets, with an average age of 18.2 years, followed by 737-500s that average 16.6 years old. Both models are out of production.

Separately, United said today it plans a special livery for the Boeing 787 Dreamliners it will begin receiving in September, with a gold line running along the fuselage. United, the first North American carrier to receive the composite-plastic plane, expects to start flying five of the jets this year.

The airline has firm orders for 50 Dreamliners with deliveries through 2019.

http://www.bloomberg.com/news/2012-07-09/boeing-said-to-win-8-4-billion-united-order-for-100-jets.html

Cabinet to back airlines' no to EU carbon tax

Cabinet to back airlines' no to EU carbon tax Resolution soon retaliation against EU airlines, air pacts possible, say officials

The Union Cabinet is likely to soon pass a resolution endorsing the fact that Indian airliners would not share their specific carbon emission data with European Union (EU) authorities. This will be the first time since the imbroglio began over the buzz that government was going to officially communicate to the EU that it would not adhere to the latter’s changed emission trading system (ETS) laws.

While around 35 countries have refused to follow the EU’s new directives on carbon emission, only India and China have even refused to share their carbon emission data with Brussels. The government is also likely to indicate it is open to the idea of reviewing all the separate bilateral agreements on civil aviation that India has with each of the 27 member-states of the EU, a senior official involved with the issue told Business Standard

The government has also hinted at strong retaliation if the EU imposes severe penalties on Indian air carriers. The official noted the number of flights European airlines operate in India are more than thrice the number that India operates to Europe. Also not ruled out is taking the issue to the World Trade Organization’s (WTO) dispute settlement body, as the “last resort”.

TAKE-OFF TROUBLE

Govt also open to the idea of reviewing all the separate bilateral agreements on civil aviation with each of the 27 member-states The Cabinet will also officially communicate to the EU that it would not be party to any sort of “extra territorial imposition” 35 countries have refused to follow the EU's new directives on carbon emission India and China have even refused to share their carbon emission data with Brussels

“The Cabinet will endorse the decision that India will not share its data. If need be, we are also open to the idea of reviewing the bilateral arrangements on aviation with each of the member-states and find an amicable solution to this problem. We are open to sit on the negotiating table and explore ways to mitigate the issue,” the official, who refused to be identified, said.

The cabinet will also officially communicate to the EU that it would not be party to any sort of “extra territorial imposition”. Only the guidelines being worked out under the United Nations’ International Civil Aviation Organization (ICAO) would be followed. The latter talks, to put a cap on carbon emission by international airliners, have been on for the past 15 years at the ICAO and remain inconclusive. As a result, the EU had come up with its own rules to check the emission targets of all airlines polluting the European skies.

Earlier, the EU had threatened India and China with a ban on their airlines from European skies. However, last month, the EU spokesman for climate action, Isaac Valero Ladron, had told Business Standard that it would impose financial penalties, not ban the airlines.

The 27-member bloc had decided to include the aviation sector under the EU ETS in January this year. Since then, it has asked all domestic and foreign airlines to comply with the changed laws and share their respective carbon emission data with Brussels. These airlines would now need to follow a specific benchmark on carbon emission or pay a carbon tax, as well as face penalties. While other countries have shared their data, India and China have refused to do so.

http://www.business-standard.com/india/news/cabinet-to-back-airlines-no-to-eu-carbon-tax/480078/

Air India Boeing Dreamliners grounded by bureaucracy

NEW DELHI: Three of Boeing's cutting-edge 787 Dreamliners painted in Air India colours are parked in South Carolina, waiting for the ailing state carrier to pay for them and take possession.

The 787, which promises to help modernise Air India's ageing fleet, has instead been a source of several headaches for the money-losing carrier.

The three planes, the first of which was ready for delivery at the end of May, are caught up in a dispute between the US planemaker and India over compensation to the airline after production was delayed by four years.

India has not yet signed off on an undisclosed package agreed between Air India and Boeing, according to a senior government official directly involved in the process.

"We still do not have inputs from several ministries, including departments like expenditure secretary in the finance ministry. So the process is getting delayed," the official said on Wednesday, declining to be identified.

Air India has ordered 27 Dreamliners in total and was to be the first non-Japanese carrier to take possession of the long-haul plane, whose carbon-composite construction makes it more fuel-efficient than earlier models.

At list prices, the three planes have a combined value of about $580 million, although discounts are common. They are being financed by Standard Chartered Bank.

"Three Dreamliners are ready for delivery and are parked at Charleston, South Carolina. We are just waiting for Air India to receive those," said Dinesh Keskar, Boeing's vice president of sales and marketing for Asia-Pacific and India.

The Dreamliners are part of orders totalling $6 billion made by Air India in 2005, stretching already constrained finances that subsequently required a $5.8 billion government bailout.

More recently, the right to fly the 787 was at the heart of a 58-day strike by a group of about 500 pilots.

The striking pilots had demanded that their colleagues from the former Indian Airlines, the domestic state-run carrier that merged with Air India, not be trained to fly Dreamliners because they worried it could hurt their own career prospects.

The first of the three planes, showcased at an air show earlier this year in India, was ready for delivery in late May, and Air India sent a group of pilots to take delivery.

Those pilots flew back as passengers after Air India and Boeing could not agree on compensation, two sources with direct knowledge of the matter said.

India's Cabinet Committee on Economic Affairs must approve the compensation but has been without a head since Pranab Mukherjee stepped down as finance minister last month to run for the largely ceremonial post of president.

"I hope we will have a decision within this month," said another senior government official, declining to be identified.

http://timesofindia.indiatimes.com/business/india-business/Air-India-Boeing-Dreamliners-grounded-by-bureaucracy/articleshow/14822445.cms

Airbus Scraps Target of 30 A380 Sales as Demand Dwindles

Airbus SAS abandoned a target of selling 30 A380 superjumbo jets this year, as airlines opt for smaller, less-expensive airliners in an economic slump.

“The big aircraft market has been slowing down,” Airbus Sales Chief John Leahy said in an interview at the Farnborough air show today. The target of 30 is “looking like a stretch at this point but when you set your goals at the beginning of the year you can’t change them. Let’s see how close we can get.”

Airbus has struggled with its flagship model, after cracks emerged in wing components and output in the first half only reached a third of the annual goal of 30 deliveries.

The A380, which typically seats about 520 passengers on two decks, is Airbus’s response to Boeing Co. (BA)’s 747 jumbo. That plane’s latest variant, the 747-8, has also failed to sustain the momentum of earlier versions, with Chicago-based Boeing booking the last orders for the humpbacked jet one year ago.

Airbus parent European Aeronautic, Defence & Space Co. fell 4.7 percent, the most since October, to 26.92 euros in Paris. The drop pared EADS’s gain this year to 11 percent.

Slow Intake

Airbus’s only contract for the A380 this year is one for four aircraft worth $1.58 billion from Russia’s Transaero Airlines. That’s after Leahy had said Feb. 15 at the Singapore air (SIA) show that he expected to sell at least 30 of the planes, replenishing the backlog by matching the delivery target.

“They’ll struggle to meet that level next year as well,”said Mark Lapidus, managing partner at London-based Doric Asset Finance Ltd., which is the biggest lessor of the A380, with 18.“Fixing the wings is diverting a lot of resources and that’s going to continue to be the case.”

The 747-8’s strength has been in the freighter model, with 70 sales so far compared with only 36 for the passenger version, and even those purchases have been under pressure. Boeing said in November that it lost a deal for five 747-8s when lessor Dubai Aerospace Enterprise Ltd. converted that order to the cargo version of the twin-engine 777.

“You can expect over the course of the next twelve months a number of orders to be realized on the 747 on the passenger side,” Patrick Shanahan, the chief of Boeing’s airplane programs, said today. “The freight market has been a little off. We have a good backlog there. I would expect the same thing, maybe a little bit later.”

Four-Engine Aircraft

The A380 and 747 are the only remaining aircraft with four engines in the manufacturers’ lineup. Airbus ended production of its four-engine A340 last year after the jet with the company’s longest fuselage lost out to the Boeing 777. Airlines are opting for more fuel-efficient two-engine jets, as kerosene makes up the single biggest expense for carriers.

Qantas Airways Ltd. (QAN) and Singapore Airlines Ltd. have both had to repair A380s after fissures were found in wing parts. While the aircraft is safe to fly with the cracks, repair work has cost Airbus more than a quarter of a billion euros and damaged the image of the world’s largest commercial aircraft. Emirates is the biggest customer for the A380, having ordered a total of 90 units, with a list price of $389.9 million apiece.

Qatar Airways Ltd. will receive an upgraded version of Airbus SAS’s A380 superjumbo after refusing to take jets with wing faults requiring modifications later, Chief Executive Officer Akbar Al Baker said at the show this week. The second-biggest Middle East carrier behind Etihad will take its first A380 in January 2014, he said.

Airbus has delivered 10 A380s so far this year, and would need to double output in the second half to reach its target.Malaysian Airline System BHD (MAS) is among the most recent airlines to receive the double-decker, and the carrier has put the jet on display at the Farnborough air show.

http://www.bloomberg.com/news/2012-07-11/airbus-scraps-target-of-30-a380-sales-as-demand-dwindles.html

Air India Boeing Dreamliners grounded by bureaucracy

‘India has not yet signed off on an undisclosed package agreed between Air India and Boeing’

New Delhi: Three of Boeing’s cutting-edge 787 Dreamliners painted in Air India colours are parked in South Carolina, waiting for the ailing state carrier to pay for them and take possession.

The 787, which promises to help modernize Air India’s ageing fleet, has instead been a source of several headaches for the money-losing carrier.

The three planes, the first of which was ready for delivery at the end of May, are caught up in a dispute between the US planemaker and India over compensation to the airline after production was delayed by four years.

India has not yet signed off on an undisclosed package agreed between Air India and Boeing, according to a senior government official directly involved in the process.

“We still do not have inputs from several ministries, including departments like expenditure secretary in the finance ministry. So the process is getting delayed,” the official said on Wednesday, declining to be identified.

Air India has ordered 27 Dreamliners in total and was to be the first non-Japanese carrier to take possession of the long-haul plane, whose carbon-composite construction makes it more fuel-efficient than earlier models.

At list prices, the three planes have a combined value of about $580 million, although discounts are common. They are being financed by Standard Chartered Bank.

“Three Dreamliners are ready for delivery and are parked at Charleston, South Carolina. We are just waiting for Air India to receive those,” said Dinesh Keskar, Boeing’s vice president of sales and marketing for Asia-Pacific and India.

The Dreamliners are part of orders totalling $6 billion made by Air India in 2005, stretching already constrained finances that subsequently required a $5.8 billion government bailout.

More recently, the right to fly the 787 was at the heart of a 58-day strike by a group of about 500 pilots.

The striking pilots had demanded that their colleagues from the former Indian Airlines, the domestic state-run carrier that merged with Air India, not be trained to fly Dreamliners because they worried it could hurt their own career prospects.

The first of the three planes, showcased at an air show earlier this year in India, was ready for delivery in late May, and Air India sent a group of pilots to take delivery.

Those pilots flew back as passengers after Air India and Boeing could not agree on compensation, two sources with direct knowledge of the matter said.

The cabinet committee on economic affairs (CCEA) must approve the compensation but has been without a head since Pranab Mukherjee stepped down as finance minister last month to run for the largely ceremonial post of president.

“I hope we will have a decision within this month,” said another senior government official, declining to be identified.

http://www.livemint.com/2012/07/11192940/Air-India-Boeing-Dreamliners-g.html

Day 2 of Kingfisher pilots' strike: 12 flights cancelled

New Delhi: At least 12 flights of Kingfisher Airlines were cancelled on Wednesday as pilots, who fly its short- haul ATR planes, continued their strike for the second day protesting non-payment of salaries.

Nine flights from Bangalore and at least three from Delhi were cancelled till this afternoon as several pilots did not report for duty, airline officials said. All the flights cancelled involved operation of the 70-seater turboprop ATR fleet of the Vijay Mallya-owned airline.

A bid by Kingfisher CEO Sanjay Aggarwal to pacify the agitating cockpit crew failed yesterday, even after he is understood to have promised the pilots in Delhi that the payment process would begin on Friday.

The agitating pilots said they would await the outcome of their discussion with the CEO till Friday and then decide on the future course of action.

They complained that they have not received salaries and other dues over the past five months and charged the management with failing to honour promises.

The flights cancelled from Delhi were those to Jaipur, Chandigarh and Udaipur, while those from Bangalore included services to Chennai, Mangalore, Hubli, Pune and Mumbai.

Airline sources said Kingfisher's Airbus A-320 flights were not affected and were operating normally.

This is the second time in last nine days that the pilots have struck work. The earlier strike on July 2 was called off after a few hours with the management promising to pay some sections of staff from July 6.

While the junior staff got part of their dues, the airline management had said the rest of them, including pilots, would be paid in a few days thereafter.

http://zeenews.india.com/business/news/companies/day-2-of-kingfisher-pilots-strike-12-flights-cancelled_55545.html

Air India revenue rises 21% in April-June

MUMBAI: Despite the two-month-long strike by a section of its pilots, the state-owned Air India saw its revenues rise 21% in the April-June quarter.

The carrier's topline rose 3% in June over the same period last fiscal, notwithstanding the fact that it operated a truncated flight schedule on the international network during the entire month, officials said.

"Our performance has been good on several parameters, both on quarter-on-quarter as well as month-on-month basis. Our overall revenue rose 20.8% in the April-June quarter to Rs 2,900 crore, from Rs 2,400 crore in the year-ago quarter," an official said. Over 400 pilots of the now derecognised Indian Pilots Guild went on a strike on May 7. It ended on July 3.

The strike had forced the management to operate only profitable routes, causing revenue loss of Rs 600 crore.

The seat factor during the period also rose three per cent, the official said, adding that yield per seat shot up 26% in June as ticket prices went up by about 10-20% across the board due to the holiday rush.

The national carrier has a Rs 67,000 crore debt pile, including Rs 24,000 crore accumulated losses.

http://timesofindia.indiatimes.com/business/india-business/Air-India-revenue-rises-21-in-April-June/articleshow/14833156.cms

Airline policy revamp likely after Presidential poll

New Delhi, July 11:

The Government is working on a comprehensive package for the airline industry. This will also include relaxation of norms for Foreign Direct Investment (FDI) in domestic airlines.

A senior Government official told Business Line, “The Cabinet is likely to consider a comprehensive package immediately after the Presidential election. This package is being prepared in consultation with the Ministries of Civil Aviation, Petroleum and Finance, Department of Industrial Policy and Promotion (DIPP) among others” The Presidential election will be over with the counting of votes, scheduled for July 21.

Equity stake

The highlight of the package will be allowing foreign airlines to pick up equity in domestic scheduled airlines. At present, though FDI up to 49 per cent is allowed, foreign airlines cannot pick up equity either directly or indirectly. The expected change in policy may remove this restriction.

A senior DIPP official claimed that the consultation on FDI in the domestic aviation sector is almost complete. The official, however, refused to comment on whether political opposition had been sorted out or not. DIPP is the nodal wing for the FDI issue. Earlier, there were differences in the Government on whether to allow 26 per cent or 49 per cent. Then regulatory issues followed. And finally, when these issues were resolved, alleged opposition from the UPA ally Trinamool Congress (TMC) delayed a decision on the proposal.

The second important issue the package is likely to deal with is jet fuel. A senior Government official said the option of moving aviation turbine fuel to a specific rate of taxation from ad valorem is being considered. This is because declaring aviation turbine fuel a ‘Declared Goods’ might not find favour with States.

A product brought under ‘Declared Goods’ category attracts lower and uniform duty of 4 per cent in all States. At present, the sales tax on ATF in various states ranges from 4-30 per cent. At the same time, levying duty at a specific rate will not raise the total tax component in case the crude prices rise. Currently, whenever the price rises, airlines face a double whammy as both the tax component at the Central and State level rise.

Apart from these two issues, there may be some provisions for making Delhi and Chennai hubs. The Prime Minister, while setting the targets for infrastructure sector for 2012-13, has already talked about such a move.

http://www.thehindubusinessline.com/todays-paper/tp-economy/article3628844.ece

Airline policy

The Government is working on a comprehensive package for the airline industry. This will also include relaxation of norms for foreign direct investment in domestic airlines.

http://www.thehindubusinessline.com/todays-paper/article3628935.ece

HDFC to value non-core assets of Kingfisher Airlines

Mortgage lender also to find buyer for two properties in Mumbai and Goa

New Delhi, July 11:

Mortgage lender HDFC will find a buyer for the debt-laden Kingfisher Airlines’ non-core assets — Kingfisher House in Mumbai and the promoters’ villa in Goa.

The consortium of 17 banks has agreed to Kingfisher Airlines roping in HDFC to do the valuation of these two properties and also find a buyer, sources in the banking industry said. Kingfisher Airlines is looking to liquidate non-core assets as part of its efforts to repay the debt raised from banks.

As the banks collectively hold the rights to the two properties, they have a say in their disposal, it was pointed out. HDFC does not have any debt exposure to Kingfisher Airlines.

But selling the two properties will only lighten the debt burden for the private carrier, which owes about Rs 6,500 crore to the consortium of 17 banks. This is because the sale proceeds, as and when realised, will be a fraction of the outstandings.

There is still no clarity as to how the banks will split among themselves the proceeds from the sale of these two properties.

The valuation report on the two properties will be submitted to the bank consortium, led by State Bank of India. Thereafter, the banks are likely to take a call. Representatives of the private carrier met all the 17 lenders in Mumbai on July 5. Kingfisher Airlines described this meeting as an “update meeting” and not one for discussions leading to commencement of recovery proceedings.

At the meeting, banks wanted Kingfisher Airlines to come up with a concrete action plan, within a fortnight, to revive its operations. From 64 aircraft in November last, the airline’s fleet strength is down to 13.

Kingfisher House has been lying vacant after the airline staff moved to new offices at the Qube in Mumbai. The private airline may get Rs 90-100 crore by selling this building.

Of the bank loans of Rs 6,500 crore as at end March 2012, State Bank of India alone has an exposure of Rs 1,400 crore, followed by Punjab National Bank (Rs 700 crore), Bank of Baroda (Rs 500 crore) and ICICI Bank (Rs 450 crore).

ICICI Bank recently offloaded its debt exposure in the airline to a fund managed by SREI Infrastructure Finance.

Kingfisher had pledged assets ranging from its brand to office furniture for the Rs 6,500-crore bank loans, according to the Finance Ministry.

The assets pledged include a luxury villa in Goa, two helicopters, a building in Mumbai. Shares have also been used as collateral for loans as of November 2011, Mr Namo Narain Meena, Minister of State for Finance, had told Parliament last December.

Lenders are understood to have also asked for a revaluation of the Kingfisher brand, which was pledged with them in 2010.

Kingfisher Airlines has not made any profit since its launch in May 2005. The aircraft lessors too recently took back the planes after the airline reportedly defaulted on lease rentals.

krsrivats@thehindu.co.in

Debt woes The airline owes Rs 6,500 crore to 17 banks HDFC will submit the valuation report on the two assets The airline had an ‘update meeting’ with 17 lenders on July 5 Kingfisher’s fleet strength has come down to 13 from 64 last November

http://www.thehindubusinessline.com/todays-paper/article3628852.ece