Korean Air orders 25 Boeing aircraft for 5.5 billion dollars

Korean Air Tuesday announced a 5.5 billion dollar order for 25 Boeing passenger and freight aircraft, the biggest deal in South Korean aviation history and a fresh setback for European rival Airbus.

The nation’s leading flag carrier said in a statement it would buy 10 777-300ER (Extended Range) planes, four 737-900ER and one 737-700, five 747-8 Freighters and five 777-200 Freighters.

It also has options for four 777-300ER, two 747-8F and two 737-900ER.

Delivery of the aircraft is scheduled for between 2009 and 2019.

The transaction is the biggest aircraft order in Korea’s aviation history in terms of the number of planes and the purchase price, said spokesman Shin Jin-Chul.

Korean Air said it aims to maintain its position as the world’s number one commercial cargo carrier, which it has held for the past two years, and to become one of the world’s top 10 passenger carriers by 2010.

The long-range 777-300ERs will replace the 747-400 passenger aircraft that KAL is currently converting to freighters, while the 747-8 and 777-200 freighters will expand cargo capacity and operational efficiency.

The 737-900ERs will provide extra capability for passenger routes to neighbouring countries, it said, adding that world passenger and cargo markets are expected to grow at an annual rate of 5.0-6.0 percent in the next 20 years.

Korean Air said the order will help it meet increasing demand following China’s liberalisation of the aviation market. It would also increase efficiency through fleet modernization and a cut in fuel and operating costs.

“The addition of Boeing’s aircraft to our fleet will play an integral part in our development to become a leader in the world’s aviation industry,” said airline chairman and CEO Yang Ho-Cho.

Korean Air has a fleet of 118 aircraft and operates almost 400 passenger flights per day to 102 cities in 33 countries.

Aviation analyst Jim Eckes described the order as significant for Boeing and one which “strategically really hurts Airbus.”

He noted the order came two weeks after FedEx Corp., citing delivery delays, cancelled an order for 10 freighter versions of Airbus’s A380 superjumbo and announced it was buying 15 Boeing 777 freighter planes instead,

“For Korean Air, being the leader in world cargo, to select 777s is quite significant,” said Eckes, managing director of Indoswiss Aviation, who estimated it will end up paying 20-30 percent less than the 5.5 billion dollar list price.

The order also solidifies the position of the 747 new-model freighter, he told AFP. The A380 freighter would become less interesting to airlines committing to Boeing models.

Airbus does not have an equivalent of the twin-engine long-range 777 apart from its proposed A350, Eckes said, “but the (new) A350 will be less desirable (to develop) as more and more airlines buy 777s.”

The 777-300, he said, is a good plane for Korean Air, with “long thin routes” such as Seoul to Toronto — with a fair amount of traffic but not enough to support a daily 747 service.

The twin-engine 777 could also cut operating costs by around 20 percent compared to the four-engine 747.

The 737-900ER was Boeing’s next generation mainstay 737 and competes directly in the market with Airbus’s A320, Eckes said.

“Korean Air is one of Asia’s major airlines and very forward-thinking. They were one of the earliest customers for Airbus when it came on the market in the late 1970s and now they are staking out a position to be somewhat pro-Boeing.”