Air France-KLM in talks with Boeing, Airbus for 160 jets

Air France-KLM has begun negotiations with Boeing Co. and Airbus SE on what could be the group’s biggest-ever aircraft order as it seeks to expand low-cost operations and renew part of its main Dutch fleet.

The 160 single-aisle planes would be destined for the Transavia discount division and European operations at KLM, a spokesman said Monday. The brands currently operate only Boeing jets on short- and mid-range routes.

The contest will pit Boeing’s resurgent 737 Max against Airbus’s A320neo-series narrow-bodies. The fleet at Transavia, which has French and Dutch divisions, comprises mostly 737-800s, and the addition of aircraft from another manufacturer would go against the strategy of budget rivals like EasyJet Plc, which stick to a single type to keep down costs. KLM also operates 737s and has been standardizing around Boeing models for long-haul flights.

Boeing and Airbus didn’t immediately respond to requests for comment.

Air France-KLM Chief Executive Officer Ben Smith has made the expansion of low-cost operations a key element of plans to rebound from the coronavirus pandemic. He aims to as much as triple the number of Transavia jets based in France after the group lost market share there to low-cost competitors.

Max Success

Boeing has had a string of sales wins with the Max, which was grounded for 18 months after fatal crashes in 2018 and 2019. United Airlines Holdings Inc. last month agreed to buy 200 of the planes, while handing Airbus an order for 70 of its larger A321neos. Southwest Airlines Co., which has an all-737 fleet, topped up its Max backlog by 100 planes in March, after considering the Airbus A220.

Any order at Air France-KLM would come after the company last year received loans and guarantees worth 10.4 billion euros ($12 billion) from France and the Netherlands, which are both shareholders, followed by a further 4 billion euros in debt conversion and fresh capital backed by Paris in April.

The latest rescue saw France’s stake edge toward 30% and was approved by European Union competition authorities on condition that the aid not be used to fund aggressive commercial expansion.

EC Scrutiny

The European Commission declined to comment Monday on the airline’s fleet plans, while saying that officials continue to monitor conditions attached to their approval of the French investment. French Finance Minister Bruno Le Maire last year called on Air France to be a good customer for Airbus, which is based in the southern French city of Toulouse.

The Netherlands has been exploring providing more funding to KLM for months. The timing of that support is up to the government, Smith was quoted as saying in an interview with Het Financieele Dagblad, which also reported on the potential order.

Air France is expecting deliveries in September from an order for 60 Airbus A220s to be used on its own short-haul routes, though the model would be too small for the KLM and Transavia requirements. Smith has urged Airbus to make a stretched version of the plane.

The Cityhopper regional division of KLM operates smaller aircraft but already has deliveries outstanding for the latest E2 jets from Embraer SA.

Air France-KLM shares fell 3.2% as of 2:38 p.m. in Paris on Monday, while Airbus was up 0.1%. Boeing shares were off 0.8% in premarket U.S. trading.