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FedEx cancels Airbus A380 order, switches to Boeing

NEW YORK (Reuters) - European plane maker Airbus EAD.PA, which has faced a series of production delays on its high-profile A380 superjumbo program, suffered a major blow on Tuesday when FedEx Corp. FDX.N canceled a roughly $2.5 billion order and switched to rival Boeing Co. BA.N

A Boeing 777-200LR (longer range) Worldliner jet taxis at Heathrow airport in London after setting an endurance record for a non-stop commercial flight November 10, 2005. FedEx Express, a unit of FedEx Corp., on Tuesday said it agreed to buy 15 Boeing Co. 777 freighter aircraft and canceled its order for 10 Airbus A380-800F aircraft due to delays in delivery. REUTERS/Paul Hackett

FedEx Express, the express package delivery unit of U.S. shipping company FedEx, became the first customer to terminate an order for Airbus’ flagship plane when it scrapped an agreement to buy 10 A380-800F aircraft.

Instead, FedEx ordered 15 Boeing 777 Freighter aircraft and took options to purchase 15 more. The previous agreement with Airbus included an option for another 10 A380 planes, a FedEx spokesman said, but those options are now invalid.

FedEx said it expects to take delivery of four Boeing 777s in 2009, eight in 2010 and the remainder in 2011. At a list price of $232.5 million to $240 million each, the order will be worth at least $3.48 billion to Boeing.

The Boeing 777 Freighter, launched in May 2005, is the world’s largest twin-engine cargo aircraft, but smaller than Boeing’s new four-engined 747-8F Freighter.

The cancellation is a further blow to Airbus and its majority parent, EADS EAD.PA, which have been plunged into financial and political crisis after a string of wiring delays on the A380 pushed the world's largest ever commercial plane two years behind schedule.

FedEx's decision cuts the number of outstanding orders for the A380 freighter to 15 from 25. Last month, FedEx rival United Parcel Services Inc. UPS.N, which has 10 A380s on order, said it had set up a team to evaluate its purchase.

The switch to Boeing is a boost for the U.S. planemaker, said Morningstar analyst Chris Lozier.

“It’s definitely a good sign -- both the order and the cancellation,” Lozier said. “I’m guessing that certainly they have those slots promised and they should have no problem making those deliveries.”

EADS shares closed down 3 percent on the Paris stock market, while Boeing was up around 5.4 percent in afternoon trading on the New York Stock Exchange. The Standard & Poor's Aerospace and Defense index .GSPAERO was up 1.6 percent.

“The decision to purchase Boeing 777s was taken after Airbus announced significant delays for delivery of A380s,” said Maury Lane, a spokesman at FedEx Express. “Global package demand continues to grow and we need the appropriate aircraft to meet that demand.”

FedEx, based in Memphis, Tennessee, said it continues to be Airbus’ largest wide-body airplane customer and will add new and used Airbus wide-body aircraft to its fleet in the coming years.

An Airbus spokesman said the company “regrets FedEx’s decision, but we understand their need to urgently address capacity issues.”

The spokesman added that Airbus remained committed to the freighter program: “We still expect the A380 freighter to be a successful program from the outset, although we did not expect demand to be very high at the start.”

A Boeing spokesman said the company is prepared to meet FedEx’s delivery schedule: “We are very pleased to meet the needs of such an important customer,” spokesman Jim Proulx said.

FedEx shares were up 83 cents, 0.7 percent, at $114.77, in afternoon trading, while Boeing was up $4.21 at $84.69, both on the NYSE.

Additional reporting by Chris Reiter in New York, Nick Carey and Kyle Peterson in Chicago and Nick Antonovics in Paris

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