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Airbus wins $7bn Philippine order

Aug 28 2012 11:00 Reuters

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Manila - Airbus won a $7bn order to help more than triple Philippine Airlines' fleet, beating Boeing to a deal despite US support for Manila in a diplomatic dispute with China.

The flag carrier, which plans to buy up to 100 new jets in total within the next five to seven years as it fights to regain dominance of the local market, said it was still in talks with both Airbus and Boeing for its next tranche of planes.

For this stage of fleet expansion, the airline has ordered 10 long-haul A330-300s and 44 jets from the A321 family, with delivery starting in 2013, Asia’s oldest airline said in a statement. The carrier is ready to issue more shares to fund its jet purchases, it said.

“The good Boeing planes we are looking at are the 777-300 ER and the upcoming 777-X. We’re also interested in the Boeing 787-9 Dreamliner,” President Ramon Ang told reporters on the sidelines of the deal signing event in Manila on Tuesday.

“We have the option on whichever type of aircraft to go,” he said.

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.

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 US thinking and temporarily raising US hopes of a commercial aviation deal benefiting export jobs.

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 US 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.

Airbus hopes to win orders to sell up to 100 A320 planes to China when German Chancellor Angela Merkel visits the country this week, industry sources said on Monday.

China regularly places three-figure plane orders tied to state events held with US or European leaders.

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