Air Canada, Virgin Sign With Airbus

Airbus Industrie on Friday won orders from Air Canada and Virgin Atlantic for a total of 26 planes worth $4 billion, scoring a victory over Boeing Co. on the very day that it acquires McDonnell Douglas Corp.

Virgin Atlantic said it will order 18 aircraft worth $2.6 billion, nearly doubling the size of its fleet and tipping the balance of that fleet in favor of the European aircraft consortium. Air Canada announced its intent to order eight planes in the A330/A340 family worth $1.4 billion, based on catalog prices, and took options for an additional 20 planes.

The orders supported the theory that Boeing’s acquisition of McDonnell Douglas could work in Airbus’ favor, by encouraging carriers to buy planes from the world’s only remaining competitor to Boeing.

“You could argue in a peculiar way that the merger of Boeing and McDonnell Douglas has ensured the viability of Airbus,” said Charles Armitage, an analyst at Lehman Bros. in London.

Virgin Chairman Richard Branson made just that point when commenting on the London-based British carrier’s order.

“Boeing makes excellent aircraft, but it is in the interest of both the aircraft industry and the consumer for them to have strong competition,” he said in a prepared statement.

Both carriers signed letters of intent for their orders. The orders become definitive only when a firm order is signed.

The five twin-engine A330-300 and three four-engine A-340-300 will replace Air Canada’s fleet of six Boeing 747-100 and 747-200 aircraft and two A340s. Air Canada will take delivery of the first airplanes in October 1999.

Buzz Hargove, president of the Canadian Auto Workers union, which represents some of Boeing’s workers, has said Air Canada’s decision to buy Airbus may lead to job losses at Boeing and its suppliers.

“Boeing is constantly assessing its business strategy worldwide,” said Errol Weaver, a spokesman for Boeing in Canada, when asked about the impact of Air Canada’s decision. “That’s all I can say at this time.”

Seattle-based Boeing shares fell 19 cents to close at $58.50 on the New York Stock Exchange.

The commitments by the two airlines also brought Airbus several steps closer to a formal launch of its planned new version of its wide-body A340 aircraft.

Virgin’s order “assures us that we are on the right track by expanding our innovative and modern aircraft family,” said Jean Pierson, the managing director at Airbus.