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FedEx cancels Airbus order, goes for Boeing 777

by Bithika Khargarhia - November 8, 2006 - 0 comments

FedEx Express, a unit of FedEx Corp., on Tuesday terminated an order for 10 Airbus A380s freighters, giving a major setback to the European aircraft maker whose flagship double-deck, four-engined airliner has been hit by costly delays.

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[quote=Bithika Khargarhia]<div class="flexinode-body flexinode-1"><div class="flexinode-textarea-1"><div class="form-item">
 <p>FedEx Express, a unit of FedEx Corp., on Tuesday terminated an order for 10 Airbus A380s freighters, giving a major setback to the European aircraft maker whose flagship double-deck, four-engined airliner has been hit by costly delays.</p>
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 <p>FedEx, instead, has signed an agreement with Airbus’s chief rival, The Boeing Company, to acquire 15 new Boeing 777 Freighter aircraft with options to purchase an additional 15 aircraft.</p>
<p>The U.S.-based delivery company’s move came after Airbus announced significant delays in delivery of the A380. The air-courier company has notified Airbus about the cancellation of its order for 10 A380-800Fs. </p>
<p>"Global demand for air cargo and express services continues to grow rapidly and FedEx has made significant investments in our network to meet customers’ needs and fulfill our business objectives. Therefore, it was necessary and prudent for us to acquire the Boeing 777 Freighter." said Frederick W. Smith, chairman, president and CEO, FedEx Corp.</p>
<p>FedEx is due to take delivery of all 15 Boeing jets in 2009-2011 and has options on an additional 15. </p>
<p>About company’s decision to switch to the 777, Smith said, “The availability and delivery timing of this aircraft, coupled with its attractive payload range and economics, make this choice the best decision for FedEx, its customers, shareowners and employees.” </p>
<p>Although, FedEx Express has cancelled its order for A380s but it will still remain Airbus' largest wide-body airplane customer and will add more new and used Airbus wide-body aircraft to its fleet in coming years, the American cargo company said in its press release yesterday. </p>
<p>The European aircraft maker, which is making efforts to thrash Boeing for dominance in the commercial airplane market, has had major setbacks in the production of the Super-jumbo, the largest commercial jetliner ever made. Spiral problems have delayed delivery of the A380 by two years and led to the step down of several key executives. </p>
<p>The Toulouse, France-based jet manufacturing company jolted investors and customers in June by declaring a second six-month delay to the A380 program and then doubled the holdup again in October.</p>
<p>"Airbus regrets the decision made by FedEx," Airbus spokeswoman Barbara Kracht said, "but we understand their need to urgently address their capacity growth." </p>
<p>Meanwhile, European Aeronautic, Defence & Space Co. (EADS), the parent company of Airbus, today posted its first quarterly loss in three years. In an e-mailed statement, the company stated a third-quarter loss of 195 million euros ($249 million) compared with net income of 279 million euros a year earlier. </p>
<p>Contrary to loss, the company was expected to report a profit of 142 million euros, according to the median estimate of seven analysts surveyed by a news agency.</p>
<p>EADS also warned that the overall two-year delay will blot out an estimated US$6 billion off profits over the next four years.</p>
<p>FedEx’s order cancellation has pushed Boeing's stock, placing it at soaring $4.37, or 5.43 percent to close at $84.85, in trading on the New York Stock Exchange, yesterday, while shares of EADS dipped sharply to end 3.1 percent lower at US$26.24 in Paris.</p>
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