November 15, 2017 / 6:04 AM / 3 years ago

Record Airbus order as Franke ups bet on budget airlines

DUBAI (Reuters) - Airbus (AIR.PA) hailed its biggest ever airliner deal on Wednesday with an umbrella agreement to sell 430 planes worth up to $50 billion to U.S. budget airlines investor Bill Franke.

The preliminary deal for A320neo-family narrowbody jets was signed at the Dubai Airshow and offers a major boost to Airbus, which has lagged arch-rival Boeing (BA.N) in orders this year.

It also ensures veteran sales chief John Leahy retires on a high in the coming months.

Boeing immediately hit back with a provisional agreement to sell 175 planes to budget airline flydubai. Including options to buy a further 50 planes, that deal could be worth $27 billion at list prices.

The deal between Airbus and Franke’s Indigo Partners is billed as the industry’s largest by number of aircraft.

For Airbus, the $49.5 billion list price value is seen as a record, though it is eclipsed by a $76 billion Emirates deal with Boeing in 2013.

“I think we could buy several countries’ GDP with it,” said Franke, a gentlemanly but hard-nosed negotiator who is said to have won unusually steep discounts to advertised prices.

“Hopefully I can do better than that,” he added.

The package technically covers four separate agreements jointly negotiated through Franke as a common investor, and Airbus billed the deal only as a record “announcement”.

Franke did not take part in a signing by airline chiefs.

A person close to the talks said that such “wholesale” aircraft deals could become more common as more private equity and new sources of funding come into the airline business.


Indigo plans to supply the narrowbody jets to four airlines in which it has stakes: U.S. carrier Frontier Airlines, Mexico’s Volaris, Chilean JetSMART and Hungary’s Wizz Air (WIZZ.L).

Ultra-low-cost carriers such as these have rewritten the industry rule book by combining bargain fares with optional services and upgrades for passengers prepared to pay extra.

Bill Franke, Managing Partner of Indigo Partners LLC, attends a news conference at the Dubai Airshow in Dubai, United Arab Emirates November 15, 2017. REUTERS/Satish Kumar

Franke went to Airbus several months ago with a proposal to pool the needs of his airlines, setting in train a complex negotiation that one observer described as “herding cats”.

Airbus, shares of which rose by 2.4 percent on Wednesday, said it expects to finalize the transaction directly with the airlines in the coming weeks as it tries to close a 250-plane deficit in its order race with Boeing. Franke described this as an aggressive but achievable target.

For now, the headline total of almost 700 jets covered by air show announcements fails to change the order battle as barely 30 of the deals so far represent finalised contracts.

The framework deal, along with flydubai’s deal for Boeing’s 737 MAX narrowbody jets, underscores how airlines are taking advantage of slowing global demand to negotiate competitive deals to add to their fleets.


The Franke deal also marks a dramatic swan song for Airbus sales chief Leahy, who is due to retire in the coming months from a role he has held since 1994.

The 67-year-old has overseen the sale of jets worth $1.7 trillion at list prices and helped to lift Airbus’s market share from a mere 18 percent to stand roughly at par with Boeing. The two rivals account for the vast majority of the market.

This year, however, Airbus’s share of the order tally had dropped to 35 percent before the Dubai show, with a rejuvenated Boeing management having made advances in Singapore and elsewhere.

Slideshow (2 Images)

The blockbuster finale to the main part of the Nov. 12-16 show lifted a despondent mood that had settled over the Airbus chalet when a deal for A380 superjumbos collapsed on day one.

“I think both sides will take stock and see if something can be agreed later this year,” an industry source told Reuters.

(Graphic: Boeing vs Airbus:

Reporting by Tim Hepher and Alexander Cornwell; Editing by Mark Potter and David Goodman

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