Tags: airbus | philippines | plane | boeing

Airbus Nears $7 Billion Philippines Order Despite US Lobbying

Monday, 27 August 2012 03:05 PM

Airbus looks set to win a 50-jet order from Philippine Airlines Inc after U.S. support for Manila in a diplomatic dispute with China failed to give Boeing Co the multibillion-dollar deal, people familiar with the matter said.

The order, for approximately 40 narrowbody A320-family jets and 10 long-haul A330s, could net the European firm $7 billion at list prices but is expected to involve hefty discounts as lobbying adds fuel to an ongoing price war.

The deal is expected to be announced at a news conference scheduled for Tuesday in Manila.

EADS unit Airbus and Philippines Airlines declined to comment.

The head of the national flag carrier, known as PAL, told Reuters this month that it would soon decide between Airbus and Boeing in a contest to renew its mainly Airbus fleet, which includes models from both suppliers.

Boeing and Airbus are already locked in a global contest for market share, in some cases more than halving prices to bolster orders of the newly revamped models of best-selling narrowbody jets, industry sources and analysts say.

But a territorial spat in the South China Sea appears to have added a diplomatic dimension to the talks as Washington seeks to cement a growing alignment with Manila on the issue.

One person familiar with the matter said there had been significant "commercial and political pressure" on the airline to secure a deal with Boeing.

Boeing declined to comment on the negotiations.

In Washington, the State Department did not immediately respond to a request for comment.



The South China Sea is seen as Asia's biggest potential military flashpoint.

Beijing's sovereignty claim over the huge area has set it against Vietnam and the Philippines as the three race to tap possibly huge oil reserves.

The United States pledged in April to triple military aid to Manila in 2012 while remaining broadly cautious on defence ties.

Philippines President Benigno Aquino visited the United States in June, highlighting the archipelago's growing importance in U.S. thinking and temporarily raising U.S. hopes of a commercial aviation deal benefiting export jobs.

Some industry sources said Tuesday's anticipated deal may not be the last word on PAL's fleet renewal, with potential demand for longer-range, wider-bodied jets up for grabs.

The airline has not yet decided its needs but Boeing could start with the advantage of an existing presence, whereas Airbus dominates smaller and medium parts of PAL's fleet, they added.

With prestige, jobs and often influence at stake, experts say diplomacy is an occasional weapon in jetliner deals.

A 2005 diplomatic cable released by Wikileaks said U.S. diplomats in Manila were "working closely" with Boeing, which had formally requested diplomatic support for previous efforts to sell the Boeing 777 to PAL, resulting in an order in 2007.

Analysts say Airbus - originally a consortium between France, Germany, Britain and Spain - also benefits from diplomatic support from European nations for major contracts.

Recent French presidents Jacques Chirac and Nicolas Sarkozy both regularly promoted Airbus overseas, especially in Asia.

Bloomberg reported that Airbus could win a Chinese order for 100 narrowbody jets during a state visit by German Chancellor Angela Merkel. Airbus was not available for comment. China regularly places three-figure plane orders tied to state events held with U.S. or European leaders.

© 2020 Thomson/Reuters. All rights reserved.

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Monday, 27 August 2012 03:05 PM
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