Boeing sets sights on $2 billion United small jets order: sources

PARIS/NEW YORK (Reuters) - United Airlines is close to deciding an order for about 30 small jets worth around $2 billion at list prices and Boeing looks well placed to win at least part of the deal after undercutting smaller rivals, industry sources said.

The Boeing logo is seen at their headquarters in Chicago, April 24, 2013. REUTERS/Jim Young

A decision by the Chicago-based airline to pick Boeing’s 737-700 jet would be a blow for Canada’s Bombardier, which has courted United as a key prospect for its struggling CSeries, and potentially Brazil’s Embraer as well.

United’s requirement for 100-seat aircraft is in the natural hunting ground for those manufacturers, but Boeing waded in with highly competitive offers for its slightly larger 737-700, which officially seats 126 passengers, the sources said.

Still, a deal has not been finalised and could face last-minute shifts in negotiations that have already been marked by heavy discounting, the sources said.

“It’s the January sale,” one source close to the talks said.

United said it did not discuss future fleet plans. Boeing said it did not discuss market speculation. Bombardier, Embraer and Airbus, another possible contender, also declined comment.

United is cutting the number of 50-seat jets it contracts to others to fly under its United Express brand and moving toward larger and more efficient planes flown by its own pilots.

United’s tender for 30 or more 100-seaters ignited a fierce battle at the lower end of the $130 billion annual jet market, where the Airbus-Boeing duopoly is most under threat.

Bombardier is looking for a headline-grabbing win from a big name such as United or JetBlue as its flagship CSeries jet prepares to enter service after delays and cash problems.

Embraer is seeking an endorsement from an existing customer with at least part of the deal, while analysts say Boeing is keen to fill spaces in its production line as it prepares for the transition to a new version of its single-aisle 737 series.

Airbus and Boeing have seen little demand for their smallest single-aisle variants as demand surges for more popular 150-200 seaters. But they enjoy significant firepower to offer discounts due to high overall volumes and low marginal costs.

One consoling factor for Airbus and Boeing from slow sales of the 737-700 and A319 is that they can slash prices for those planes without contaminating future deals, one source said. Demand for both, and their future revamped equivalents, is thin.

Aircraft valuations expert Stuart Hatcher of UK-based IBA Group said during an industry briefing that despite a recent dearth of orders, the CSeries should increase its presence this year. But he warned that the market for small jetliners could be smaller than Bombardier hoped because of more new competition.

Additional reporting by Allison Lampert in Montreal, Brad Haynes in Sao Paulo, Andrea Shalal in Washington, Alwyn Scott in New York; editing by David Clarke