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In a First, Japan Airlines Orders Airbus Jets Airbus Loosens Boeing’s U.S. Grip on Japan’s Market
(about 5 hours later)
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. TOKYO — In selling planes to airlines, Boeing has long counted on the United States as its local market. Its big rival, Airbus, holds the home-field advantage in Europe. And the two compete head to head virtually everywhere else in the world.
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. Except for Japan. It is Asia’s second-biggest airline market, and for reasons tracing to World War II had been all but a captive buyer of American airplanes.
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. On Monday, that changed.
As beaming European diplomats looked on here, Airbus announced a $9.5 billion order from Japan Airlines, finally breaking through Boeing’s market fortress.
For JAL, as the airline is known, the contract is partly about diversifying its suppliers — and the need for a class of new planes that Airbus can deliver sooner than Boeing. And as the world’s airlines are demanding new generations of fuel-efficient planes, both Boeing and Airbus are likely to continue receiving orders that will take them years to fill. That may be why Boeing’s stock price barely budged through midday trading in New York on Monday, while the shares of Airbus’s parent, the European consortium EADS, were up 1.7 percent in Europe.
Analysts nonetheless saw it as a blow to Boeing, which has stumbled of late over problems with its 787 Dreamliner, most notably in Japan.
“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.
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. JAL and Airbus said the airline would buy 31 A350 wide-body long-distance jets, which are expected to replace Boeing 777s. Airbus is set to begin deliveries of the A350, a new plane that made its first test flight in June, to the airline in 2019.
Boeing has its own replacement planned for the 777, which it refers to as the 777X, but that aircraft is not as far along in development at the Airbus A350. And after battery problems grounded Boeing Dreamliners for months this year, JAL indicated a need for a second aircraft supplier.
“I think that there was some recognition that maybe you do need to have dual-sourcing,” Scott Hamilton, managing director of the Leeham Company, an aviation consulting firm in Issaquah, Wash., said on Monday.
“I think the fact that Airbus could deliver the A350 before the 777X is part of it,” he said. “And I’m sure JAL got a hell of a deal.”
Boeing declined to comment, other than issuing a statement that read in part: “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. We have built a strong relationship with Japan Airlines over the last 50 years and we look to continue our partnership going forward.”
European governments went out of their way to acknowledge the symbolism of Airbus’s Japanese breakthrough. Diplomats from France, Germany, Britain and the European Union were on hand as the purchase agreement was signed by Fabrice Brégier, the Airbus chief executive, and Yoshiharu Ueki, JAL’s president, at a news conference in Tokyo.
Laurent Fabius, the French foreign minister, noted that the deal was sealed after many months of high-level lobbying by European officials, including President François Hollande of France during his visit to Tokyo in June.
“This is a success for Europe’s aeronautic industry as well as for economic diplomacy,” Mr. Fabius said in a statement.
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.
After World War II, when B-29 bombers made by Boeing played a large part in Japan’s surrender, firebombing Tokyo and dropping the atomic bombs on Hiroshima and Nagasaki, the occupation force banned Japan from making its own airplanes. So Japan’s retooled peacetime industry soon focused instead on becoming a supplier to the largest plane maker at the time, Boeing.
Over the decades, Japanese companies have come to play an ever-larger role as Boeing suppliers, culminating with the 787, 35 percent of whose parts are made in Japan. The government has provided generous subsidies to the suppliers, helping them to win crucial contracts with Boeing.
Japanese companies are also responsible for 12 percent of the A350’s production, if suppliers to the plane’s Rolls-Royce engines are included.
In the postwar years Boeing was not the only American plane maker in Japan; JAL also bought planes from Douglas, one of the precursors to McDonnell Douglas. But in subsequent decades, mergers and consolidation of the American airplane industry left Boeing as the last big manufacturer standing. And so the desire by Japanese carriers to diversify predated this year’s Dreamliner problems.
Mr. Brégier said he had been courting JAL executives intently since taking over as chief executive of Airbus last year. Mr. Brégier, who worked in Japan early in his career for Pechiney, the former French metals company, spoke a few words in halting Japanese at a news conference in Tokyo before switching to English.
“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.”“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.”
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. The Japanese air travel market is the second largest in Asia, behind China’s, though China’s is growing faster. Worldwide, Japan ranks sixth in number of passengers carried annually, after the United States, China, Britain, Spain and Germany.
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. Boeing has 428 passenger and cargo planes in service in Japan, 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.
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. The longstanding ties between the Japanese carriers and Boeing have also been subject to new tensions over problems with the 787 Dreamliner, one of Boeing’s newest planes. Not only have All Nippon and JAL bought 787s, but also a substantial portion of the planes’ manufacturing takes place in Japan. Mitsubishi Heavy Industries, for example, makes the wings.
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 introduction of the 787 was delayed several times, with the first delivery, to All Nippon, coming in 2011. Then, this year, Dreamliners worldwide were grounded for months by problems with batteries, causing scheduling and logistical difficulties for the Japanese carriers and other 787 customers.
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. “I think it played a significant role in this decision,” said Geoffrey Tudor, a former JAL executive who is an analyst at Japan Aviation Management Research in Tokyo, referring to the grounding of the 787.
“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. JAL’s president, Mr. Ueki, said, however, that the decision to buy the A350 had “nothing to do with that situation.” He said 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 the fuel consumption.
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. JAL, which was once owned by the government, was privatized in 1987, only to be bailed out repeatedly with public money. In its 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 government-supported fund. JAL sold $8.5 billion worth of stock to the public last year.
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.
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.”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.

Nicola Clark reported from Paris. Hisako Ueno contributed reporting from Tokyo, and Christopher Drew from New York.

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.