Aerosvit, Boeing ink plane deal

by Elisabeth Sewall, Assistant Editor
Aug 09 2007, 01:21

Aerosvit, Ukraine’s largest airline, inked a half-billion-dollar agreement last week to replace some of its fleet with state-of-the-art Boeing passenger aircraft, nixing attempts by Airbus to break into the market.

The Kyiv-based carrier ordered seven Next-Generation Boeing 737-800 airplanes, with a total value of $523 million, and secured purchase rights for another seven.

Aerosvit plans to replace its aging fleet of 13 classic Boeings with the order.

Chicago-based Boeing, the largest global aircraft manufacturer by revenues, announced the deal in an Aug. 2 press release.

The deal marks the first direct contract between a major aircraft maker and one of Ukraine’s fast-growing airlines.

It’s also a step forward for Boeing to beat out Airbus and strengthen its position as the main supplier of modern passenger aircraft to Ukrainian airlines.

According to Boeing’s press release, Boeing’s 737s are the most successful commercial plane model in history, with more than 7,000 orders. There are currently over 1,500 unfilled orders for its Next-Generation 737s, cumulatively worth more than $100 billion. The model carries a list price of $50-85 million and is Boeing’s top seller, particularly among low-fare airlines.

Aerosvit, a primarily privately-owned company (22 percent of its shares are state-owned), is one of Ukraine’s two major international commercial airlines. Together with its only major Ukrainian competitor, Ukraine International Airlines, the two control the lion’s share of international passenger traffic.

“This order is significant for Ukrainian aviation. It demonstrates dedicated execution of our replacement strategy and is an indicator of Ukraine’s current economic development and progress as an important player in international business and tourism,” Boeing’s press release quoted Aron Mayberg, director general of Aerosvit, as saying.

However, the Ukrainian market is geared to face fierce foreign competition, as Ukraine eventually opens its air space to large foreign airlines, forcing its smaller national carriers to take major steps to boost competitiveness on the domestic market.

As part of its strategy to do just that, in February of this year, Aerosvit announced the creation of a strategic alliance with another, small-scale domestic airline, in anticipation of what it said was impending fierce competition from foreign giants.

Aerosvit’s major business has primarily come from international flights to distant destinations in Asia and North America, as well as to Israel and former Soviet republics.

“Travel to and from Ukraine is prospering, along with the rest of Eastern Europe. Aerosvit is showing a keen sense of business by preparing now for future growth,” said Craig Jones, vice president of Sales, Russia/CIS, Boeing Commercial Airplanes.

The August Boeing order marks Aerosvit’s first direct purchase from an airplane producer since the carrier was founded in 1994.

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