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TUI Travel picks Boeing for 60-plane order worth $6 billion

05/31/2013 | Reuters

LONDON (Reuters) - British travel firm TUI Travel agreed to buy 60 mid-range Boeing jets with an option for 90 more, moving to make its fleet more fuel-efficient and delivering the U.S. planemaker a big contract win over European rival Airbus.

The world's largest tour operator, which owns six European airlines including Britain's Thomson Airways, said on Friday the initial order of Boeing (BA.N) 737 MAX planes was secured at a "significant discount" to the list price of $6.09 billion.

The planes, to be powered by CFM LEAP-1B engines, are scheduled for delivery between January 2018 and March 2023, TUI Travel (TT.L) said

It said such a large deal would represent a class 1 transaction, meaning it would require shareholder approval.

"TUI Travel have 59 leases on planes expiring over the next three years so the fact they are looking to buy these planes shows the strength of the company," said Oriel Securities analyst Jeffrey Harwood, who added that cutting its fuel bill was a big motivation for the group.

Several European carriers have seen profits battered by high fuel costs - which now account for around half of airlines' operating expenditure - in recent years.

Boeing has said the 737 MAX, which competes with Airbus' (EAD.PA) A320neo, will burn 13 percent less fuel than current 737 models.

Reuters reported earlier this year that TUI Travel was close to sealing a deal for 60 narrow-body airliners.


Boeing is also competing with Airbus to supply British low-cost airline easyJet (EZJ.L) with new planes.

EasyJet is edging towards a firm order for at least 100 A320neo or 737 MAX planes jets worth around $10 billion, with as many again in options, sources close to the deal said, adding that the European planemaker was the favorite.

EasyJet, which operates an all-Airbus fleet of 213 aircraft, ideally wants to remain a single-manufacturer fleet, but is considering moving entirely to Boeing planes.

TUI Travel, whose airlines use 141 aircraft, received the first of 13 long-haul Boeing 787 Dreamliners planes on Friday.

"Being able to offer our customers the most advanced, comfortable aircraft, whether they are travelling with us to short or long-haul destinations, while reducing our environmental impact, will only strengthen our position," said TUI Travel Chief Executive Peter Long.

Shares in TUI Travel, which is 56 percent owned by Germany's TUI AG (TUIGn.DE), were 1.4 percent down at 357.9 pence by 0910 GMT, valuing the company at around 4 billion pounds.

(Additional reporting by Tim Hepher and Sarah Young; editing by Kate Holton, John Stonestreet)

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