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Fri, Feb 23, 2007

Aeroflot Backs Out Of Boeing Order, This Time For Good(?)

Mounting Political Tensions Apparently To Blame

The off-again, on-again Aeroflot order for as many as 22 Boeing 787s appears to be off-again, perhaps this time for good.

The Seattle Times reports Boeing officials consider the order dead in the water, victim to mounting tensions between the US and Russia over foreign policy differences. One unnamed source familiar with the purchase talks told the paper Boeing gave up on Aeroflot's order "a month or so ago."

The Times also reports Russia's Interfax news agency, quoting a source at Aeroflot, states airline will probably finalize a deal for 22 Airbus A350 XWB airliners by the end of this year.

This is not the first time the Aeroflot deal has been threatened. Boeing thought it had the deal all-but-finalized last June, when Aeroflot stated it would buy the 787s after the Russian government signed off on the order. In September, however, Aeroflot postponed a meeting on a final decision... which left both Boeing and its European rival stewing.

Aeroflot later allowed a purchase deadline extended by Boeing to lapse. The American planemaker agreed to extend the deadline... but that final date passed as well, with no sale.

Indications of potential trouble surfaced last August, due to strained diplomatic relations between the two countries. Sergei Koltovich, Aeroflot's head of fleet planning, said then "both Boeing and Aeroflot are trying to make this order happen," but added US criticism of Russian policies was making it hard to get government approval.

Adding to those tensions are recent comments made by Russian President Vladimir Putin. In his speech in Munich, Germany on February 10, Putin railed against the Bush Administration's foreign policy, saying the US had "overstepped its national borders in every way."

While those statements perhaps fall short of the gravitas of Nikita Khrushchev's shoe-banging tirade in the late 1950s, Air Cargo Management Group managing director Ned Laird notes Putin's speech "could have been written by him."

Aeroflot's apparent decision to go with the A350 also had implications for other deals Boeing has in the works in Russia. A side deal to lease several used MD-11 freighters to Aeroflot on the cheap will now be scaled back... and, said one source, Boeing will now be charging a lot more, for fewer planes.

Ladies and gentlemen, we appear to have a new Cold War on our hands...



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