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Turkey’s Pegasus orders 75 Airbus jetliners in upset for Boeing

Pegasus Airlines chairman Ali Sabanci speaks before a signing ceremony in Istanbul Dec. 18, 2012 for its order of 75 medium-haul planes from Airbus SAS. Airbus and Boeing have both accused each other of starting a price war this year.

Osman Orsal/Reuters

Budget carrier Pegasus Airlines turned its back on Boeing Co. and placed its first order for Airbus SAS jetliners on Tuesday in a $7.5-billion (U.S.) deal hailed as Turkey's largest single plane order.

The order for at least 75 A320neo aircraft represents a breakthrough for the European jet maker.

Pegasus currently operates aircraft built by Airbus's arch-rival Boeing. It switched allegiance after what industry sources described as a bitterly fought price contest between the plane makers, during negotiations first reported by Reuters.

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Industry sources say Airbus and Boeing are locked in their fiercest worldwide battle for market share for a decade as they sign up airlines for the latest revamped versions of their most popular jets, designed to offer fuel savings of around 15 per cent.

Confirming a Reuters report, Pegasus chairman Ali Sabanci said he had initially considered buying 40 aircraft, but increased this to keep up with Turkey's aviation growth.

"This … is the largest (order) in the history of Turkish civil aviation," Mr. Sabanci told politicians and VIPs in the Istanbul carrier's training centre.

Shares in Airbus parent EADS NV rose 2.2 per cent.

The deal includes a firm order for 75 Airbus aircraft, including 58 fuel-saving A320neo aircraft and 17 A321neo jets. Those aircraft have a combined list price of $7.5-billion.

It also includes options for a further 25 aircraft. If all options are exercised, the deal's value for all 100 aircraft could rise to $9.9-billion, based on official Airbus prices.

In practice, airlines win significant discounts for large orders.

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Airbus, which had tried unsuccessfully to break Boeing's monopoly at the Turkish carrier on two previous occasions, conceded it had offered discounts but declined to give details.

"We had a very tough negotiation," said Christopher Buckley, Airbus executive vice-president for Europe, Asia and Pacific.

A source close to Boeing said the Pegasus talks had taken prices to territory where the U.S. company was "not prepared to go," but declined to be more specific.

Airbus and Boeing have both accused each other of starting a price war this year. Actual prices are rarely disclosed but some analysts say aircraft are being offered at below half price.

In Asia, a key Airbus customer, Singapore Airlines regional subsidiary SilkAir, defected to Boeing in August after another gruelling campaign said to have been won on prices.

Pegasus Airlines announced a deal value of $12-billion, which is significantly above the current list prices, but said this included a provision for automatic price increases before delivery which will take place between 2015 or 2016 and 2022.

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Founded in 1990, Pegasus has grown its fleet from just two aircraft to more than 40 mostly Boeing BA.N 737-800s over the past two decades and serves 62 destinations in 26 countries.

Its expansion plans highlight rapid growth in Turkish aviation after flag carrier Turkish Airlines recently ordered long-range aircraft from both Boeing and Airbus.

Turkey's economy was the fastest-growing in Europe last year, expanding 8.5 per cent. It has slowed this year, but double-digit export growth has bolstered Turkey's resistance to a slowdown blighting much of Western Europe.

It has also been aggressively growing its airline industry with Turkish Airlines – the world's fastest-growing carrier – acting at least in part as an arm of foreign policy, adding new routes to a fourth city in Libya, a fifth in Iran as well as to Niger and Cameroon this month alone.

Turkish Transport Minister Binali Yildirim said the number of passengers handled in Turkish airports was projected to rise from 130 million this year to 350 million by 2023.

He contrasted recent orders from Pegasus and larger rival Turkish Airlines for Airbus jets with faltering attempts by Turkey to enter the European Union.

"Although we have jet-speed relations with Airbus, our relations with EU showed almost no progress," Mr. Yildirim said.

Turkey began talks in 2005 but has only completed one of the 35 policy "chapters" every candidate must conclude to join the trade bloc. All but 13 of those chapters are blocked by France, Cyprus and the European Commission, the EU's executive arm.

Ankara's EU Affairs Minister Egemen Bagis said on Tuesday that Turkey hoped France would unblock at least two chapters in coming months, ahead of a visit by President Francois Hollande.

In a speech, Mr. Yildirim also challenged Airbus to contribute to Turkey's aviation sector from the revenue of Pegasus orders.

Airbus says work in Turkey will support 2,500 jobs by 2015 and its total spending there will reach $2.4-billion by 2025.

Turkey's aerospace industry participates in the Airbus A400M military airlifter, supplies some fuselage panels for A320 jets and will make ailerons or control surfaces on the future A350.

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