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BA puts pounds 2bn order up for grabs; Boeing and Airbus are rivals to supply 100 jets.

British Airways has asked plane makers to bid for pounds 600million worth of airliners for the Midlands and Manchester.

And it has challenged aircraft manufacturers vying to win its overall pounds 2 billion order for up to 100 new short-haul jets to come up with new ways of financing the deal, as part of a plan to reduce its own capital commitments.

BA announced that it has invited Boeing and rival Airbus Industrie to make proposals to supply up to 100 aircraft over the next ten years to replace its European short-haul fleet with a single-type aircraft. About 30 of the planes are earmarked for British Airways Regional, based at Birmingham and Manchester.

Chief executive Mr Robert Ayling said he wanted to cut BA's capital exposure and believed operating leases were not the only way an airline might reduce capital expenditure on its aircraft.

"Operating leases are very conventional," he said yesterday.

"If we can enter into partnerships with other companies whose businesses are much more capitaased then perhaps there are deals which we can do between the two of us which would help in the acquisition of aircraft by us.

"What we are looking for is long-term use of the aircraft taking as little of the long term capital risk and liability as we can possibly manage."

It was now up to Airbus and Boeing to come up with ideas.

"We are looking at anything for innovative proposals, so we can solve some of the problems we have," he said. "We are currently acquiring too many capital assets and liabilities and ideally we would like to reduce that over the course of the next few years."

At the end of 1997 BA's net borrowings stood at pounds 3.96 billion and net assets at pounds 3.38 billion.

The new aircraft competition is essentially between Boeing's 737 series aircraft and the Airbus A320 family with BA seeking an initial order of up to 30 aircraft worth between pounds 400 and pounds 600 million for its BA Regional.

But BA said it would want a total of about 100 jets of the same type over the next decade to also replace a mixed fleet of seven aircraft types in service with BA Regional, Air Liberte, Deutsche BA and its EuroGatwick operations.

"One of the advantages of being able to re-equip at this magnitude is that we can introduce a single aircraft type which will reduce engineering and maintenance and operating costs," Mr Ayling said.

He said he expected to pick the winning manufacturer "before the summer" with a view to first deliveries due to start to BA Regional in September 1999.

A win by Airbus would give the European consortium its first ever order from BA, which currently operates only ten Airbus A320s inherited from its takeover of British Caledonian airways.

But Mr Ayling denied that Boeing was favourite, despite the fact that Boeing aircraft account for over 80 per cent of its current fleet of some 300 jet aircraft. Recent orders made for Boeing 737s for Deutsche BA and BA Regional were for short-term leases, he said.

"They both have aircraft which are able to satisfy our requirements. We will be looking at the operating performance of the aircraft and the terms on which they are offered," he said.

Boeing and Airbus have until March 16 to complete their initial tenders.
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Publication:The Birmingham Post (England)
Geographic Code:1USA
Date:Feb 24, 1998
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