A GOOD TWO WEEKS: BOEING COMPLETES OVER $10

UNCLAS BERLIN 003477 SIPDIS SENSITIVE SIPDIS PASS USTR FOR MMOWREY, COMMERCE 3310 P. DACHER E.O. 12958: N/A TAGS: BEXP ECON ETRD GM SUBJECT: A GOOD TWO WEEKS: BOEING COMPLETES OVER $10 BILLION OF SALES IN GERMANY Sensitive But Unclassified - Contains Proprietary Information ¶1. (SBU) Summary: Boeing reports it is winning orders from Germany's two largest air carriers, Lufthansa and Air Berlin, worth almost $11 billion. Air Berlin and Boeing announced November 28 they were finalizing a deal for 85 Boeing 737-type aircraft worth $5.1 billion. The order would represent the largest ever one-time sale of Boeing 737 aircraft in Germany. On December 7, Lufthansa announced it plans to buy 20 Boeing 747-8s worth over $5 billion, with options to purchase an additional 20 aircraft. While Lufthansa has been under pressure to buy Airbus and Boeing is pleased with the sale, Boeing personnel remained concerned Airbus might capture a higher percentage of the Lufthansa fleet. End Summary. ¶2. (U) Germany's second largest air carrier, Air Berlin, has announced it will buy 85 Boeing 737s with a list price of $5.7 billion. Within the package, Air Berlin intends to purchase sixty Boeing 737-800 Next Generation jets. The other twenty-five 737s are part of a previously placed order by DBA, an airline Air Berlin recently acquired. Boeing plans to deliver the 85 planes between 2007 and 2010. According to Eric Schwartz, Deputy Director of Boeing's Germany Office, these planes are already in the pipeline and therefore will be delivered first. Schwartz thought Air Berlin's purchase decision was not only influenced by Boeing's efficient, low-noise engines, but by the fact 737s are lighter than the A320. This factor leads to cost savings on landing rights, which the EU bases on plane weight. ¶3. (SBU) The second large sale within a week was Lufthansa's decision to purchase 20 Boeing 747-8 jets for over $5 billion, with an option to buy an additional 20 planes. Schwartz noted the 747-8 can carry 467 passengers and effectively bridges the gap in passenger carrying capacity -- the A380 carries 550 passengers; the A340 holds 330 -- created by Lufthansa's future market and fleet strategies. The new 747-8 also costs the same per trip as the current 747s, but can seat an additional 51 passengers and holds 28% more cargo. Schwartz said Boeing has sold 68 747-8s since they went on the market 13 months ago, compared to 140 A380s Airbus sold over the past six years. ¶4. (SBU) Despite this purchase, future Boeing sales to Lufthansa remain on a downward trend, according to Schwartz. The 747 purchase represents the first Boeing sale to Lufthansa since 1997 and maintains the current Airbus-Boeing fleet composition percentage of 64-36. This percentage may drop as the 737 fleet is retired over the next several years. However, Schwartz would not rule out future sales of 787s to Lufthansa, noting that the German airline has again delayed the decision on purchasing the reconfiguration of the A350. ¶5. (SBU) Commenting on the woes of EADS and the A380, Schwartz noted that Europe's largest aircraft leasing company, ILFC, recently changed its order of A380s from cargo planes to passenger aircraft. This decision leaves UPS as the sole remaining air cargo company with an A380 order. Schwartz thought this fact could make UPS reconsider its decision to buy A380s, given the costs associated with the equipment needed for operating the A380 as a cargo aircraft. Schwartz opined such a decision could have implications for Germany's participation in the A380 project, as Hamburg is the primary location for producing A380s designed to handle cargo. TIMKEN JR