July 30, 2019 / 4:20 PM / 20 days ago

Air France-KLM buys smallest Airbus, retires largest

PARIS (Reuters) - Air France-KLM provisionally agreed to order 60 of Airbus’s new A220 jets on Tuesday while announcing the retirement of the planemaker’s A380 superjumbo from its fleet, in a bid to improve the airline’s fuel efficiency and costs.

FILE PHOTO: An Airbus A220 passenger jet, formerly known as the Bombardier CSeries, stands in the final assembly line where the European company plans a $30 million investment to keep up with forecast demand, in Mirabel near Montreal, Quebec, Canada January 14, 2019. REUTERS/Tim Hepher/File Photo

In a boost for the A220 programme acquired by Airbus from Bombardier last year, Air France-KLM’s board approved 30 options and 30 purchase rights in addition to the 60 firm orders worth a$5.5 billion at 2018 list prices. Airbus no longer updates list prices. The order was first reported by French daily La Tribune.

The company said the 120-150-seater A220-300 would “improve Air France’s environmental footprint” as it gradually replaces its older A318 and A319 models at the smaller end of its fleet, starting in 2021.

Air France-KLM will also drop the A380 superjumbo entirely by the following year, the company said, adding that the current competitive environment “limits the markets on which the A380 can be operated profitably”. Air France had previous disclosed plans to retire three of its 10 superjumbos.

The move comes five months after Airbus announced it was scrapping production of the world’s largest airliner in response to lacklustre sales.

With two decks of spacious cabins and room for 544 people in standard layout, the A380 was designed to challenge Boeing’s legendary 747 but failed to take hold as airlines backed a new generation of smaller, more nimble jets.

Air France-KLM will “examine the possible options for the replacement of these planes with new-generation aircraft now available on the market,” the company said.

Following the A380’s demise, Airbus’s arch-rival Boeing is hoping its new twin-aisle 777X jet may scoop up more orders as it prepares to enter service next year.

Airbus said the A220 order was a memorandum of understanding, meaning final contractual details must be negotiated before it appears in the company’s order book.

Air France-KLM, formed from a merger of French and Dutch flag carriers in 2004, continues to operate a mixed fleet between its two main national networks.

Last month, KLM provisionally became the first major European customer for the newly certified E195-E2 offered by A220 rival Embraer of Brazil, whose commercial aerospace arm is being acquired by Boeing.

However, Embraer was not given a chance to compete for the Air France part of the fleet shake-up, industry sources said.

Airbus bought the loss-making A220 programme from Canada’s Bombardier last year and immediately began offering it to customers that already have other Airbus aircraft, allowing it to juggle prices and ancillary services across the fleet.

Monday’s deal extends a rebound for the A220 after leasing company Air Lease Corp provisionally ordered 50 of the planes at last month’s Paris Airshow as part of a broader deal giving the lessor access to Airbus’s hot-selling new longer-range A321XLR.

Reporting by Laurence Frost; Additional reporting by Tim Hepher and Sudip Kar-Gupta; Editing by Edmund Blair and David Evans

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