Potential new LV airline is buying planes

Monday, June 18, 2001 | 10:54 a.m.

SUN STAFF AND WIRE REPORTS

JetBlue Airways Corp., a New York-based low-fare airline backed in part by financier George Soros, will buy as many as 48 planes worth as much as $2.5 billion from Airbus Industrie.

The airline said it's placing firm orders for 30 of the European planemaker's 150-seat A320s, giving Airbus a boost against U.S. rival Boeing Co. It's also taking options for five of the aircraft and purchase rights for another 13.

JetBlue, which began flying last year, now serves 14 cities from its base at New York's John F. Kennedy International Airport. The company said last month that it would add a California hub at Long Beach Airport.

The low-fare airline is planning to expand even as the U.S. economy slows. Las Vegas is in JetBlue's two-year expansion plan.

"JetBlue is very much the poster child for Airbus's expansion in the North American low-fare airline market," said Richard Aboulafia, director of aviation at the Teal Group in Fairfax, Virginia. "It could become the Airbus version of Boeing's partnership with Southwest on the 737."

Low-fare leader Southwest is the No. 1 airline serving Las Vegas's McCarran International Airport, which is considered a low-yield tourist destination by airlines that would prefer to serve higher-paying business fliers.

Dallas-based Southwest Airlines Co. is one of the fastest-growing U.S. carriers and only buys Boeing's single-aisle 737s. The airline gave Boeing one of its largest orders last year, agreeing to buy at least 94 737s valued at $4.5 billion.

JetBlue, which is modeled after Southwest, now has 14 of the rival A320s and expects to take delivery of another seven this year. Starting in 2002 the carrier will take 10 a year, said David Neeleman, JetBlue's chief executive.

Only two of the 10 biggest U.S. airlines, Southwest and Continental Airlines Inc., made money in the first quarter. Big carriers such as Delta Air Lines Inc. have said they expect lower earnings this year as the slowing economy damps customer demand and pushes down revenue.

"We haven't seen such a slowdown yet, although that's not to say that it won't happen," Neeleman said at the Paris Air Show, where the order was announced. "We always say that this airline was built for the U.S. recession. We've got the lowest costs in the industry."

JetBlue placed an order for 25 A320s in April 1999 and took options and purchase rights for another 50. The carrier exercised seven of the options in May 2000.

For Airbus, the order is a boost in what's expected to be a slow year. It also gives the Toulouse, France-based company something to highlight at the air show, where the planemakers typically seek to upstage each other. JetBlue was one of three orders Airbus announced today.

The JetBlue aircraft will be powered by V2500 jet engines from International Aero Engines, a group comprising Rolls-Royce Plc, United Technologies Corp.'s Pratt & Whitney unit, DaimlerChrysler AG's MTU Aero Engines unit, and Japanese Aero Engines Corp.

The engine makers said the order is worth $435 million, and could be worth as much as $700 million if options are converted. The order represents sales of $230 million for Rolls-Royce alone, the company said in a statement.