By Tim Hepher
PARIS (Reuters) -Air France-KLM said on Monday it plans to order 50 Airbus A350 long-haul jets, together with purchase rights for an additional 40, in its largest-ever wide-body purchase as the Franco-Dutch group revamps its long-haul fleet.
The provisional deal includes both the A350-900 and the larger A350-1000 models, and the aircraft will be delivered between 2026 and 2030, the group said after its board backed the deal, estimated to be worth several billion dollars.
It follows a tight contest between Airbus and Boeing (NYSE:BA) supported by engine makers, as the airline's fleet planners juggled range, size and cost to find replacements for Airbus A330 jets and most of the group's older Boeing 777s.
The Air Current, an industry publication, reported earlier this month that the airline was closing in on an order for 50 wide-body jets and that one factor was the range involved in skirting Russian airspace amid ongoing Ukraine war sanctions.
"We are taking the assumption that the ban on Russian overflights is with us for at least the mid-term," CEO Ben Smith told reporters after announcing the order.
Smith said the A350 had won on either range or size compared with their 787 equivalents given the specific shape of the post-Ukraine network, while the larger Boeing 777X had yet to be certified and would not be available in the time required.
However, he said Air France-KLM would look at the 400-seat twin-engined jumbo to replace its Boeing 777-300ER long-haul jets which would continue to fly through this decade.
Asked about widespread production delays, Smith said Air France-KLM had considered splitting the order between Airbus and Boeing but had benefited from competitive prices by sticking to one supplier and would still have a diversified fleet.
Shares in the group earlier closed down 3.7% amid weaker travel stocks.
FLEET FLEXIBILITY
Air France-KLM, the product of a 2004 merger between French and Dutch national carriers, said the deal would give it flexibility to allocate aircraft among its brands based on market or regulatory conditions.
That includes the possibility to shift jets to any carriers it may buy, Smith said. Air France-KLM is among potential suitors for the upcoming privatisation of Portugal's TAP.
It also leaves open the possibility that capacity could be withheld from Amsterdam's Schiphol where the airline is locked in a dispute with the Dutch government over flight curbs.
"If certain jurisdictions where we have operations become non-viable, or the return expected in the business case is no longer possible, (that) may force us to put them elsewhere," Smith said when asked about such operational restrictions.
The purchase is the latest stage of a sweeping renewal and simplification of the 500-strong fleet carried out under Smith since he joined the group from Air Canada in 2018.
It comes weeks after Airbus was stung by British Airways owner IAG's decision to place a top-up order for Boeing 787s, following what industry sources described as a rift over support prices with A350 engine supplier Rolls-Royce (OTC:RYCEY).
Airbus and Rolls-Royce have both declined comment.
At Air France-KLM, in-house maintenance arms have repair partnerships with General Electric (NYSE:GE), the leading engine supplier for the 787. To win the deal and open the door for Airbus, Rolls had to overcome that apparent advantage for Boeing, Smith said.
"Not easy as you can imagine. However, we've already ordered 41 (A350s) so Rolls is quite familiar with us," he added.