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JAL Orders $9.5 Billion Worth of Airbus Jets In a First, Japan Airlines Orders Airbus Jets
(about 7 hours later)
TOKYO — Airbus announced a $9.5 billion order from Japan Airlines on Monday, giving the European aircraft builder its biggest breakthrough to date in Japan, where Boeing has been the main supplier of jetliners for decades. TOKYO — Airbus announced a $9.5 billion order from Japan Airlines on Monday, the European aircraft builder’s biggest breakthrough in Japan, which is one of the last redoubts of dominance by Boeing.
JAL and Airbus said the Japanese carrier would buy 31 A350 wide-body jets, which are expected to replace Boeing 777 jetliners in the carrier’s long-haul lineup. Deliveries will begin in 2019, and the order also included options for 25 more aircraft. Japan Airlines and Airbus said the Japanese carrier, also known as JAL, would buy 31 A350 wide-body jets, which are expected to replace Boeing 777s in the carrier’s long-haul lineup. Airbus is set to begin deliveries of the A350, a new plane that made its first test flight in June, to JAL in 2019.
The A350 order breaks down to 18 of Airbus’s latest 314-seat wide-body, the A350-900, as well as 13 of its larger, 350-seat A350-1000s, a person with knowledge of the deal said. Airbus and Boeing have been jousting for global leadership for years, with Boeing regaining the top spot in orders last year for the first time in a decade. Airbus long ago pushed into other Asian markets like China. But Japan, where Boeing has been firmly entrenched since the end of World War II, has remained unusually loyal to the American company. JAL had never bought a plane from Airbus, and JAL’s main domestic rival, All Nippon Airways, operates mostly Boeing jets.
While Boeing and Airbus have been battling each other for global market share for years, things have been different in Japan. JAL has never bought a plane from Airbus, and its main rival, All Nippon Airways, also mostly operates Boeing jets.
Although it is the first Airbus purchase for JAL, the airline acquired Japan Air Systems a few years ago and inherited some Airbus jets in that transaction.
“Certainly this is the big order Airbus was hoping for, the big foot in the door that could lead to new orders,” said Will Horton, an analyst at the CAPA Center for Aviation in Hong Kong.“Certainly this is the big order Airbus was hoping for, the big foot in the door that could lead to new orders,” said Will Horton, an analyst at the CAPA Center for Aviation in Hong Kong.
Analysts say Airbus may have offered substantial discounts to alter the airline’s all-Boeing policy. Fabrice Brégier, the Airbus chief executive, said he had been courting JAL executives intently since taking over last year. Mr. Brégier, who worked in Japan early in his career for Pechiney, the French metals company, spoke a few words in halting Japanese at a news conference in Tokyo before switching to English.
The longstanding ties between the Japanese carriers and Boeing also have been subject to new tensions over a series of problems with Boeing’s new 787 jet. Both All Nippon and JAL have bought 787s, and substantial portions of the work on the planes is done in Japan. “I have tried to give the best of Airbus to convince JAL that it was a no-brainer to select Airbus,” he said. “I think in the past Airbus did not work closely enough with potential customers in Japan.”
But the introduction of the 787 was delayed several times, and then the plane was grounded by problems with batteries, causing scheduling and logistical difficulties for the Japanese carriers and other 787 customers. Japan is the second-largest air travel market in Asia behind China, although China is growing faster. Boeing has 428 passenger and cargo planes in service in the country, compared with 61 for Airbus, according to Ascend, an aviation consulting firm. In China, by contrast, the two manufacturers are neck and neck, with more than 950 planes each in operation.
JAL’s decision to go with Airbus comes amid other signs of change in the cozy relationships that long held sway in the Japanese aviation business. The government, which used to own JAL, is increasingly distancing itself from the carrier. Airbus and Boeing expect the Asia-Pacific market to yield 35 percent to 40 percent of all deliveries of new passenger planes over the next two decades. The bulk of those orders is expected to come from airlines in China, India and Southeast Asia, and most will likely be for smaller, single-aisle workhorses like the Airbus A320 and the Boeing 737, which airlines use on high-frequency routes over relatively short distances.
Last week the Ministry of Land, Infrastructure, Transport and Tourism announced that it was awarding 11 of 16 new international takeoff and landing slots at Haneda Airport in Tokyo to All Nippon, the biggest domestic rival to JAL, leaving only five for JAL. But Japanese carriers’ need for fuel-efficient, long-range jets like the Airbus A350, the Boeing 787 and a forthcoming stretch version of the Boeing 777 are expected to increase significantly in the next 20 years as growth in intercontinental traffic between Japan and the rest of the world far outpaces expected growth in the domestic market of less than 2 percent per year.
All Nippon and JAL have an equal number of slots at Haneda, which are coveted because of the airport’s proximity to central Tokyo. Haneda is only about 15 kilometers, or 9.3 miles, from the city’s major business districts, about a quarter of the distance to Narita, the other main airport serving the Tokyo area. The longstanding ties between the Japanese carriers and Boeing have also been subject to new tensions over problems with the 787, one of Boeing’s newest planes. Both All Nippon and JAL have bought 787s, and a substantial portion of the planes’ manufacturing takes place in Japan. Mitsubishi Heavy Industries, for example, makes the wings.
The government described the decision as a way to promote fairness in the industry, after JAL benefited from several bailouts. Most recently, after JAL filed for bankruptcy protection in 2010, the airline received a capital injection of ¥350 billion, or about $3.6 billion, from a fund supported with taxpayer money. But the introduction of the 787 was delayed several times, with the first delivery, to All Nippon, coming in 2011. Then, earlier this year, the plane was grounded for months by problems with batteries, causing scheduling and logistical difficulties for the Japanese carriers and other 787 customers.
But JAL has protested the decision on Haneda, saying it was a flawed way to try to level the playing field. The move also has ramifications for partner airlines of JAL and All Nippon; JAL operates flights in cooperation with carriers in the OneWorld alliance, including British Airways and American Airlines, while All Nippon has a deal with United Continental Holdings and other members of the Star Alliance. “I think it played a significant role in this decision,” said Geoffrey Tudor, an analyst at Japan Aviation Management Research in Tokyo, and a former JAL executive, referring to the grounding of the 787.
Having secured its first contract with JAL, Airbus is eyeing the airline’s rival. All Nippon has a handful of single-aisle Airbus planes, and executives have said it is considering the A350 or a new version of the 777 for a pending order. However, JAL’s president, Yoshiharu Ueki, said the choice to buy the A350 had “nothing to do with that situation,” saying that JAL had chosen the A350 for other reasons, including an expectation of low operating costs. Like the 787, the A350 uses a substantial amount of lightweight composite material in its structure, lowering the weight and fuel consumption.
Some Japanese low-cost carriers also operate Airbus planes, but the JAL deal was the first purchase of wide-body jets, which carry higher prices and profit margins, by either of the two major Japanese carriers. JAL, which was once owned by the government, was privatized in 1987, only to be bailed out repeatedly with public money. In the latest and biggest crisis, the company filed for bankruptcy protection in 2010, and later received a capital injection of 350 billion yen, or $3.6 billion, from a fund supported with taxpayer money. JAL sold $8.5 billion worth of stock to the public last year.

Nicola Clark contributed reporting from Paris.

In the past, “JAL always followed what the government or powerful politicians said, and eventually they went under,” said Ryota Himeno, an analyst at Barclays Capital. “Now they are trying to express their independence and trying to run the business for shareholders and customers, not politicians.”
The feeling seems to be mutual, as evidenced by recent developments in a dispute over takeoff and landing slots at Haneda Airport in Tokyo. Last week, the Ministry of Land, Infrastructure, Transport and Tourism announced that it was awarding 11 of 16 new international slots to All Nippon, leaving only five for JAL.
All Nippon and JAL currently have an equal number of slots at Haneda, which are coveted because of the airport’s proximity to central Tokyo. Haneda is only about 15 kilometers, or less than 10 miles, from the city’s major business districts, about a quarter of the distance to Narita, the other main airport serving Tokyo.
The government of Prime Minister Shinzo Abe described the decision as a way to promote fairness in the industry after the bailout. The rescue occurred under a previous administration, led by the Democratic Party of Japan, a rival to Mr. Abe’s Liberal Democratic Party.
JAL has protested the decision on slots at Haneda, saying it was a flawed way to try to level the playing field. The move also has ramifications for partner airlines of JAL and All Nippon; JAL operates flights in cooperation with carriers in the OneWorld alliance, including British Airways and American Airlines, while All Nippon has a deal with United Continental and other members of the Star Alliance.
Having secured its first contract with JAL, Airbus has its eye on the airline’s rival. All Nippon has a handful of single-aisle Airbus planes, and executives have said it is considering the A350 or a new version of the 777 for an upcoming order of wide-body jets.
“Of course, if other Japanese airlines are interested in our products, we will try to treat them equally well,” said Mr. Brégier, the Airbus chief. “The world is changing. There is open competition everywhere.”
Mr. Brégier also hinted that Airbus might take a page from Boeing’s book and look for more Japanese suppliers. “With this deal, it gives us more incentive to look for Japanese work share on future assignments,” he said.
Analysts say Airbus may have offered substantial discounts to JAL. The order is for 18 of the A350-900 version of the plane, which seats 314 people, and 13 of A350-1000, which seats 350 passengers. The deal includes options for 25 additional planes.

Hisako Ueno contributed reporting from Tokyo, and Nicola Clark from Paris.