December 17, 2012 / 4:11 PM / 5 years ago

Turkey's Pegasus close to landmark Airbus order

PARIS/ISTANBUL (Reuters) - Turkish low-cost carrier Pegasus Airlines appears close to making its first purchase of European passenger jets with an order for as many as 100 Airbus A320-family aircraft, sources familiar with the matter said on Monday.

The decision to switch suppliers by a fast-growing airline that currently operates only Boeing (BA.N) jets follows a tough contest between the world's two largest planemakers.

Initial negotiations for 50 jets between Pegasus and the manufacturers were first reported by Reuters in July and became a flashpoint in the fiercest global battle for market share between Airbus and Boeing for a decade.

If confirmed, the airline's final purchase could reach as many as 100 aircraft worth more than $9 billion at official list prices, the sources said, asking not to be named.

Airbus and Pegasus declined to comment.

Founded in 1990, Pegasus has grown its fleet from just two aircraft to more than 40 mostly Boeing (BA.N) 737-800s over the past two decades and serves 52 destinations in 24 countries.

Its latest expansion highlights rapid growth in Turkish aviation after flag carrier Turkish Airlines (THYAO.IS) recently ordered long-range aircraft from both Boeing and Airbus.

Istanbul-based Pegasus is looking to seize on a 15 percent improvement in fuel consumption offered by the latest revamped models of narrowbody, medium-haul jets -- the Airbus A320neo and Boeing 737 MAX.

Industry watchers said the competition was intense as Boeing resisted efforts by Airbus to secure one of its entrenched customers, a type of duel known as a "flip fight".

Airbus is smarting after suffering the defection of one of its own high-profile customers, Silkair, the regional arm of Singapore Airlines (SIAL.SI), which announced a $5 billion order for Boeing 737 jets in August.

Both companies have accused the other of waging a price war.

Airlines often stick with one supplier for the same aircraft category to save on maintenance and training costs. But the arrival of more efficient jets sparked a scramble for orders and allowed each supplier to woo customers previously loyal to the other side.

The step-up in technology has also produced wild swings in the fortunes of U.S. and European exports as first Airbus then Boeing sold more than 1,000 jets in 2011 and 2012 respectively.

Airbus is expected to lose the annual order race to Boeing heavily this year after winning for four years in a row.

Longer term, the planemaking unit of Europe's EADS says it hopes to keep a 60 percent share of the 150-seat narrowbody segment, a market estimated at $2 trillion over 20 years.

Industry sources say Boeing is determined to defend a roughly 50 percent share of the same market. The A320 and 737 families are the world's most popular passenger planes and both serve as 'cash cows' for larger aircraft developments. (Editing by James Regan)

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