FRANKFURT Deutsche Lufthansa (LHAG.DE) unveiled a $19 billion order for new jets on Thursday as its outgoing chief executive warned the historic investment must not dilute the resolve of Europe's largest airline to stay in the black.
The deal for 59 new jets, split between Boeing (BA.N) and Airbus EAD.PA, will see the German flag carrier launch a new and larger version of Boeing's 777 long-range jet.
Lufthansa is in the middle of a dramatic revamp that includes 3,500 job cuts, at the same time as investing in modern jets to cut its fuel bill and catch up with deep-pocketed Gulf rivals, particularly on hotly contested routes to Asia.
Europe's largest airline in terms of revenues had already signed up for 100 Airbus short-haul planes in March.
The order for 34 Boeing 777-9X and 25 Airbus A350-900 jets will reduce Lufthansa's fuel consumption by 25 percent and shrink unit costs by about 20 percent compared with old models.
"This investment will safeguard about 13,000 jobs at Lufthansa alone as well as thousands of jobs at our partners in aviation and other suppliers," Chief Executive Christoph Franz told a news conference.
Franz's "SCORE" restructuring program has come under fire from labor leaders, who say Lufthansa is profitable enough and does not need cost cuts to help pay for fleet renewal.
But Franz, who is stepping down next May to join Swiss drugmaker Roche ROG.VX, warned against any let-up in the restructuring and said his successors would keep to the plan.
"Without the successful implementation of SCORE, we will not earn the necessary funds to order these planes," he said.
The deal came a day after Air France (AIRF.PA) announced 2,800 fresh job cuts as Lufthansa's rivals also cut overheads, replace fuel-thirsty planes and streamline back-office work.
"It (the order) is important for Lufthansa to secure its long-term competitiveness because it will lower unit costs and replace old fleet," Commerzbank aviation analyst Frank Skodzik said.
The deal caps a busy week in the shift towards lightweight jets built from carbon-composites after Bombardier (BBDb.TO) flew its small CSeries plane on Monday and Boeing began flight tests of the second version of its 787 Dreamliner, the 787-9.
Lufthansa's first order of the 777 passenger jet is seen a particular victory for Boeing, which aims to launch the plane later this year and is working on deals with Gulf carriers.
But the deal also reverses recent successes for two new models that Lufthansa decided not to buy: the future Airbus A350-1000 which competes with the 777-9X and the stretched Boeing 787-10, which will be close in size to the A350-900.
Lufthansa executives said they had rejected the 787-10 because it lacked enough range and the 350-seat A350-1000 because it was too small compared with the 406-seat 777-9X, which is set to be the largest passenger twinjet ever built.
Boeing said this week it had finalized orders for 10 787-10 from the leasing unit of General Electric (GE.N) and another 30 from Los Angeles-based Air Lease Corp (AL.N).
Amid continued uncertainty over the economy, Lufthansa said the deal gave it flexibility to adapt to changing conditions.
Its order for 59 aircraft assumes a 3 percent annual passenger traffic growth and options on another 30 of each type of aircraft would support as much as 5 percent growth.
If annual growth is more sluggish than expected at 1 percent, Lufthansa would use the leeway provided by options to retire more older-generation aircraft.
The industry's latest jets are designed to save fuel and allow airlines to operate profitably on longer routes with fewer passengers, a key to opening up new emerging markets.
The Boeing 777-9X will be used for the high-volume routes of Munich-Shanghai and Frankfurt-Bangkok, while the A350-900 jets are to be deployed in the mid-sized and niche markets such as Frankfurt-Vancouver and Frankfurt-Malabo stretches.
Including the aircraft order placed in March this year, Lufthansa has a total of 295 jets on order with a list value of 36 billion euros, all to be delivered by 2025.
Franz described the order as Germany's largest single private-sector investment.
(Additional reporting by Tim Hepher, Maria Sheahan, Alwyn Scott; Editing by Greg Mahlich and David Cowell)