Alaska Airlines buys 35 737s

With the Paris Air Show thousands of miles away, Seattle-based Alaska Airlines yesterday gave The Boeing Co. a strong sales boost against rival Airbus by buying 35 of the aerospace company's 737-800 passenger jets, worth $2.3 billion at list prices.

Under the agreement, Alaska maintains the option to buy 15 more of the airplanes, which Boeing says will increase the order value by $983 million, and purchase rights for another 50.

Yesterday's announcement, coming after the third day of the world's most important air show, brought the total number of announced Boeing airplane sales to more than 140. In comparison, Airbus had announced orders of 120.

Airbus' sales announced yesterday included eight Airbus A320s to Tiger Airways, 15 jets (five A350s, five A330s and five A380s) to Kingfisher Airlines, and 10 A350s to GE Commercial Aviation Service. Boeing's sales, besides the Alaska deal, included 18 737-800s to Air Europa, which also took 12 options on that model.

One aviation analyst said the Alaska announcement gives Boeing a psychological advantage in terms of the number of planes sold in a competitive global market. But Richard Aboulafia, vice president of the Virginia-based Teal Group Corp., noted that the dollar value of orders also is important.

"It's another strong boost to regain the order lead against Airbus," he said. "This should help push them over the line in the race against Airbus this year."

The individual list price for the 737-800, which entered service in April 1998, ranges from $61.5 million to $69.5 million. But sales can include discounts.

Alaska's new 737-800 aircraft, each of which is expected to carry up to 157 passengers, will be phased into service starting next year through 2011. The airplanes will be used on existing routes or possibly on new ones, said Brad Tilden, chief financial officer. As of yesterday, among Alaska's fleet of 109 airplanes, two were 737-800s.

The airplane has a range of 3,383 statute miles and can be used on transcontinental routes. The planes will increase the airline's seat capacity for higher demand routes on the West Coast, according to the carrier.

Also, starting next year, Alaska will begin its plan of taking 39 older aircraft, mainly 737-400s and MD 80s, out of service. "It was important that we did something to address replacing airplanes so the company can stay the same size," said Tilden.

While Alaska will consider using banks and capital markets to finance the new aircraft, the carrier hopes to use its cash flow to buy some of them.

Tilden said he realizes this might raise questions, especially after the carrier's controversial decision last month to save money by replacing 472 union baggage handlers with contract workers.

"The U.S. airline industry is undergoing substantial and what we think is permanent change," he said, referring to high fuel costs, consumers demanding cheaper prices and scrappy low-fare competitors.

"It's important for every airline to get profitable. Once we get there, it will help us to grow."

The 737-800 aircraft for Alaska will require two pilots, the same number for many of the planes that will be retired, and four flight attendants, he said.

Use of the aircraft also will help the carrier, which is trying to save about $340 million, trim about 10 to 20 percent in unit costs compared to the planes that will be retired. Last year, its unit cost, per available seat mile, was 7.92 cents, excluding fuel.

It is trying to reduce that number to at least 7.25 cents per mile. In comparison, JetBlue was at 4.75 cents per seat mile and Southwest was at 6.56 cents per mile.

In four of the last five years, Alaska's parent company has suffered at least $146 million in losses.

Boeing says the 737-800 helps carriers save money because the plane was designed to be efficient, including blended winglets that permit it to fly farther and higher.

As a result of more lift, Boeing says, the plane's engines do not have to work as hard. Alaska's order for the 737-800, which is assembled in Renton, is among one of the largest of its kind for Boeing.