JAL Ups 787 Order Despite Delivery Delay

February 15, 2012

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Japan Airlines, said on Wednesday it will order 10 additional 787s despite a recent problem that has delayed deliveries of its first Dreamliners, underscoring its role as one of Boeing's most loyal customers.

The Japanese flag carrier is investing JPY¥478 billion yen (USD$6.1 billion) in new aircraft to revamp its fleet over five years.

It is relying on the fuel-efficient 787 as it emerges from a government backed bailout to battle for business in an aviation market struggling to cope with weak demand, high fuel prices and the emergence of low cost carriers.

"We aim to enhance the JAL brand as a full-service carrier that clearly distinguishes itself from LCC brands," Yoshiharu Ueki, JAL's new president said at a news conference in Tokyo.

Apart from a handful of smaller regional jets, which Boeing doesn't build, JAL has only ever bought aircraft from the US company and its new business plan means most of the fleet investment will be spent at Boeing again.

The US company accounts for around 90 percent of commercial plane sales in Japan, the biggest market share it has in any major aviation market.

But a fresh glitch at Boeing's assembly plant has meant JAL now expects to get only one 787 by the end of March when it had expected four.

Boeing insists that the problem, it described as "incorrect shimming" in support structures in the aft fuselage of some planes won't push back a production schedule to build 10 787s per month by the end of next year.

JAL's home rival All Nippon Airways is planning to buy 55 of the carbon-composite jet.

Boeing has tallied 870 orders for the 787, but has been plagued by development and production delays, including a shortage of nuts and bolts in 2007, a 58-day strike in 2008 and a fire on a 787 test flight in 2010.

After failing in 2010, JAL is set to re-emerge as a traded company in a public offering as early as September that could raise more than JPY¥500 billion (USD$6.4 billion), sources have said.

The government's Enterprise Turnaround Initiative of Japan, which oversaw the airline's restructuring, including 16,000 job losses, the closure of money-losing routes and cuts to pension benefits, is aiming to recoup JPY¥350 billion from the offer.

(Reuters)