February 15, 2012 / 10:47 AM / 5 years ago

JAL ups 787 order, to rely heavily on fuel-saving jet

3 Min Read

A 787 Dreamliner being manufactured for customer Japan Airlines (JAL) is seen on the production line at the Boeing Commercial Airplane manufacturing facility in Everett, Washington February 14, 2011.Anthony Bolante

TOKYO (Reuters) - Japan Airlines, said on Wednesday it will order 10 additional 787s despite a recent glitch that has delayed deliveries of its first Dreamliners, underscoring its role as one of Boeing Co's most loyal customers.

The Japanese flag carrier, known as JAL JALFQ.PK, is investing 478 billion yen in new aircraft to revamp its fleet over five years.

It is relying on the fuel-efficient Dreamliner as it emerges from a government backed bailout to battle for business in an aviation market struggling to cope with weak demand, soaring fuel prices and the emergence of low cost carriers.

"We aim to enhance the JAL brand as a full-service carrier that clearly distinguishes itself from LCC brands,", Yoshiharu Ueki, JAL's new president said at a news conference in Tokyo

Apart from a handful of smaller regional jets, which Boeing (BA.N) doesn't build, JAL has only ever bought aircraft from the U.S. company and its new business plan means most of coming fleet splurge will be spent at Boeing again.

The U.S. company accounts for around 90 percent of commercial plane sales in Japan, the biggest market share it has in any major aviation market.

But a fresh glitch at Boeing's assembly plant has meant JAL now expects to get only one 787 by the end of March when it had expected four.

Boeing insists that the problem, it described as "incorrect shimming" in support structures in the aft fuselage of some planes won't push back a production schedule to build 10 Dreamliners per month by the end of next year.

JAL's home rival All Nippon Airway's (9202.T) is planning to buy 55 of the advanced jetliners.

Boeing has tallied 870 orders for the 787, but has been plagued by development and production delays, including a shortage of nuts and bolts in 2007, a 58-day labor strike in 2008 and a fire on a 787 test flight in 2010.

After failing in 2010, JAL is set to re-emerge as a traded company in a public offering as early as September that could raise more than 500 billion yen, sources have told Reuters.

JAL's listing is expected to rank as Japan's largest since Dai-Ichi Life Insurance (8750.T) raised 1 trillion yen in 2010.

The government's Enterprise Turnaround Initiative Corp of Japan, which oversaw the airline's restructuring, including 16,000 job losses, the closure of money-losing routes and cuts to pension benefits, is aiming to recoup 350 billion yen from the offer.

It has picked Nomura Holdings Inc (8604.T) and Daiwa Securities Group Inc (8601.T) as global coordinators for the public offering.

Editing by Edwina Gibbs

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