Tue, Mar 05, 2002 - Page 17 News List

EVA decides to cancel its 777 jet order

AIRLINES The second-largest domestic air carrier is backing away from a US$3 billion plan to buy Boeing jetliners

BLOOMBERG , TAIPEI

EVA Airways Corp (長榮航空) plans to cancel its order of long-range versions of the Boeing Co 777 jetliners worth as much as US$3 billion as Taiwan's second-largest airline opts to expand routes closer to home.

The airline is "finalizing a plan to cancel the Boeing 777 orders" as the versions on order have higher operating costs on short-range routes than other planes being considered, EVA's Chairman Yu Chong-ho (游長和) said in an interview.

EVA, along with other Asian carriers, has shifted its market focus more to regional traffic after the Sept. 11 terrorist attacks dented demand for trans-Pacific flights. That change prompted the airline to re-examine its decision in June 2000 to order three 777-200LR and four 777-300ER jetliners, with options for eight more 777s.

EVA has been the only customer to date for the 777-200LR, said Hong Kong-based Boeing spokesman Mark Hooper. He declined to comment on the airline's plans.

"EVA's more profitable routes are Hong Kong and Japan, so we wouldn't really have good use for Boeing 777s," Yu said.

EVA shares fell 0.4 percent to NT$12.7 yesterday in Taipei.

Shares of European Aeronautic Defense and Space Co, which owns 80 percent of Airbus, rose as much as 2.9 percent in Paris to 15.90 euros. Boeing shares rose 4.1 percent to US$47.84 on Friday.

Yu declined to confirm that EVA may instead order planes from rival Airbus SAS, which in January 2001 broke Boeing's monopoly on aircraft sales to the carrier.

"We can cancel the order first and order new jets later, after our evaluation," Yu said.

"There are potential opportunities for Airbus, which last year got our first sales with EVA," said Tony Phillips, Airbus's Singapore-based spokesman. "Taiwan is an important market for Airbus." Several other airlines have postponed aircraft deliveries in recent weeks to adjust for weaker demand, including Scandinavian Airlines system, which postponed taking of 13 Boeing and Airbus plans.

EVA expects to return to profit this year, betting travel will rebound worldwide and the island's economy will recover from its worst full-year recession on record, Yu said.

EVA Air slumped to a loss of NT$3.1 billion (US$88 million) in 2001 as slowing economies and fears of terrorism curtailed air travel and cargo demand.

Taiwan exports, many of which are transported by air, fell 17 percent last year as demand for computer chips and other electronic goods withered. EVA has the highest exposure to cargo traffic of all Asia's major airlines, analysts said.

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