Boeing dealt blow after Airbus' $9.5B deal with Japan Airlines

In recent years, Japanese carriers, especially newer low-cost airlines, have been gradually switching to Airbus

Airbus president Fabrice Bregier, left, and Japan Airlines president Yoshiharu Ueki, right, announce their deal in Tokyo on Monday
Yoshikazu Tsuno/AFP/Getty Images

The European aviation giant Airbus announced its first-ever deal Monday with Japan Airlines (JAL). Worth an estimated $9.5 billion, the agreement challenges Boeing's dominance in the Japanese market and deals a significant blow to the American multinational company as it struggles to recover from bad press over mechanical problems with its highly touted Boeing 787, also known as the  Dreamliner.

JAL said it was ordering 31 planes — 18 long-haul A350-900s and 13 A350-1000s — with an option to buy another 25 aircraft. The new planes are expected to come into service starting in 2019 as JAL replaces its aging Boeing 777 fleet.

The historical ties between Japan and the U.S., including security arrangements, have played a significant role in the domination of the Chicago-based Boeing Co. However, in recent years, other Japanese carriers, especially newer low-cost airlines, have been gradually switching to Airbus.

Despite that, Boeing said that Monday's deal did not hurt its relationship with JAL, saying the manufacturer would look to continue their partnership.

"Although we are disappointed with the selection, we will continue to provide the most efficient and innovative products and services that meet longer-term fleet requirements for Japan Airlines," it said in a statement. 

Dreamliner's nightmare

The push by the European plane-maker comes as JAL and domestic rival All Nippon Airways — whose fleet is also dominated by Boeing — have been hit by problems with the Dreamliner.

The lightweight plane — hailed for its fuel efficiency but marred by years of production delays — was grounded globally in January after lithium-ion batteries overheated on two planes, one of them catching fire while parked.

The Japanese carriers, which are the biggest operators of the Dreamliner, have put their fleets back into service. But they are seeking compensation from Boeing for the problems, which forced them to cancel hundreds of flights and hurt their bottom lines. 

Despite a lengthy investigation, Boeing has not identified the cause of the aircraft's battery problems, but said it put safeguards in place to prevent more incidents.

JAL president Yoshiharu Ueki said that the Dreamliner problems were "totally unrelated" to its decision to buy planes from Boeing's chief rival, adding that the Airbus planes "matched our expectations." 

But Mitsuru Miyazaki, a senior analyst at Tokyo's SMBC Friend Research Center had a different take on Monday's announcement. 

"Considering the recent troubles with the Dreamliner, JAL may have reached the conclusion that it wants to avoid the risks," he said. 

A battle for the skies

The move to buy planes from Airbus comes as JAL embarks on route expansion after it rose from the ashes of bankruptcy last year to relist on the Tokyo stock exchange. That followed an $8.5 billion initial public offering, one of the biggest share sales in 2012. JAL has posted strong earnings after its relisting, making it the most profitable airline in the world.

Airbus and Boeing have for years fought for dominance in markets around the world. This commercial battle has spilled over into a years-long legal fight at the World Trade Organization over government subsidies and other forms of state aid.

Lately the contest has focused on sales of the next generation of long-range wide-bodied jets. In that matchup, Monday's announcement represents a big blow by the Airbus A350 against the Boeing 787.

The deal follows recent successes elsewhere in Asia for Airbus, which has won contracts in China, Vietnam and Singapore totaling more than $13 billion, Al Jazeera's Hyder Abbasi reported. 

Airbus said its new-generation A350 is 25 percent more fuel efficient than its current wide-bodied planes, which could explain the reason for its popularity, Abbasi reported.

Airbus chief executive Fabrice Bregier called the JAL deal a breakthrough. But he said he did not want to dwell on the past and it merely underlined that Airbus had the better product.

"The world is changing. There is open competition everywhere," said Bregier.

Al Jazeera and wire services 

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