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Jetmakers battle for United order: sources

By Tim Hepher and Kyle Peterson

PARIS/CHICAGO (Reuters) - Airbus and Boeing are bidding to sell around 150 jets to United Continental as the world's largest airline joins an industry-wide scramble for fuel savings, people familiar with the matter said.

The merged giant has become the latest battleground as Boeing tries to close a recent sales gap with its European arch-rival and capitalize on a huge Indonesian plane order unveiled by U.S. President Barack Obama last week.

The roughly $15 billion deal could include 130 revamped narrowbody jets, designed to cut airline fuel costs sharply from mid-decade, and up to 50 of the planemakers' existing models.

Talks could be completed as soon as late December but may slip into 2012, the people said, asking not to be named.

"It is not guaranteed but there is a good likelihood, I'd say more than a 50 percent chance, of a deal before the end of the year," said a source involved in the negotiations.

Another person familiar with the discussions cautioned the deal may take longer than the few weeks remaining until the end of the year to finalize, while others noted that volumes can also change as major airplane purchases fall into place.

"Negotiations are well underway," a further source said.

Boeing declined comment. An Airbus spokesman said, "We are always in discussions with current and potential customers and these discussions remain confidential."

United Continental Holdings was formed last year from a merger of United parent UAL Corp and Continental Airlines, creating a hybrid fleet containing both Airbus and Boeing jets.

A spokesman for the Chicago-based group said it had ongoing talks with planemakers about its fleet needs, but declined to comment on a potential narrowbody order.

Despite fears of recession, the world's leading planemakers have had a harvest of plane orders this year after moving to upgrade their best-selling models -- the Airbus A320 and Boeing 737 -- with new engines capable of saving 12-15 percent fuel.

Airbus took the lead by promising to introduce the revamped A320neo from 2015 and has sold more than 1,000 of the aircraft, making what the EADS unit claims as the fastest-selling launch.

Boeing responded with the 737 MAX, due to enter service in 2017, and has accumulated more than 700 provisional orders even before finalizing the aircraft's design.

Narrowbody jets are the industry's workhorse, feeding the big hubs or operating quick turnarounds for low-cost carriers.

SCRAMBLE FOR JETS

Demand from cash-pinched airlines for fuel savings was highlighted last week when Obama oversaw a record sale of Boeing jets to Indonesia's Lion Air, months after Malaysian low-cost airline AirAsia handed a similar order to Airbus.

Whereas major U.S. carriers used to dominate the world's aircraft industry, the rise of Asian and Middle East airlines and shift of economic power to emerging markets has generated a sudden scramble to get hold of fast-disappearing stocks.

With jetmakers running out of production slots, and some banks avoiding the aircraft market due to Europe's debt crisis, Airbus and Boeing are expected to scour the world's leasing firms to find enough aircraft to pull together a United deal.

Even then, supplies are becoming so scarce that the two rivals may have to make do with only part of any deal depending on the timescale United wants for deliveries, analysts said.

"This could be an interesting order. Although United flies Airbus narrowbodies, Continental flies Boeing and the Continental management team has been happy to source its aircraft from Boeing over the years," said Rob Stallard, aerospace analyst at RBC Capital Markets in New York.

"United Continental is now a very large airline, and given the scale of its fleet replacement requirement and its experience with flying a mixed fleet, we would not be surprised if this order is split," he added.

In 2009 United split a purchase of larger jets between Airbus and Boeing, which dominate the global airliner market.

Reuters reported early soundings about a possible United narrowbody purchase in September but talks have accelerated as the market heats up, industry sources said.

The outcome could affect the balance of power between the planemakers since it is seen as a relatively open race.

Apart from a historic 460-plane order at American Airlines that saw wins for both planemakers, most deals for the new planes have merely involved upgrading existing customers.

United Continental has a narrowbody fleet of about 550 Boeing and Airbus planes. The airline has 125 firm orders to purchase new aircraft: 50 Boeing 737s, 50 Boeing 787s and 25 Airbus A350s. It has options for another 42 A320-family jets.

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