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. Last Updated: 07/27/2016

Star Alliance Eyes $9Bln Jet Order

TOKYO -- Air Canada said Saturday it would place an order for 105 jets by Christmas, inflating the size of a joint order with Austrian Airlines, Lufthansa and SAS to nearly 250 aircraft.

The four airlines, all members of the Star Alliance group, have been expected to place a joint order for 100 new 70- to 110-seater aircraft, with an option for a further 100, by the end of the year, in a bid to reduce purchasing costs.

The world's top four aircraft manufacturers -- Boeing Corp., Airbus, Bombardier Inc., and Embraer SA -- are all vying for the lucrative deal, which is potentially worth over $9 billion.

"We look forward to giving some presents out by Christmas," Air Canada chief executive Robert Milton told reporters on the sidelines of an airline industry conference in Tokyo.

Austrian Airlines said it would order 15 to 20 jets in 2004, while Scandinavian airline SAS said it planned to order 10 jets. German carrier Lufthansa AG declined to comment on how many planes it would order.

"If [Air Canada] goes to 105, then it might exceed 200 all in all," said Austrian Airlines chief executive Vagn Sorensen, who is leading negotiations for the four airlines.

An official from Air Canada said the working number for the joint order was now around 250 planes, with more firm orders than options.

Milton said the airline had already decided who it planned to place the order with, but was finalizing paperwork.

When asked if there was a possibility that Air Canada's order might be split among various manufacturers, Milton said "definitely."

Boeing is hoping to secure orders for its 717 model, Airbus is offering its smallest model, the A318, while Brazilian aircraft-maker Embraer is offering its 170 and 190.

Canada's Bombardier is also in the hunt, looking for orders for its CRJ 700 or CRJ 900.

Orders would be a welcome boost for U.S. aircraft-maker Boeing, which is under investigation for its military contracting practices, and is suffering from a severe downturn in commercial aircraft deliveries and tough competition from European rival Airbus.

The four airlines have decided on common specifications for the aircraft -- such as galleys, lavatories and lighting -- to help slash costs and create the possibility of subleasing aircraft between themselves, depending on changes to demand.

Airlines are under increasing pressure to cut costs, having taken a battering this year from the war in Iraq and the outbreak of the deadly severe acute respiratory syndrome in Asia, which caused a deep slump in traffic between March and June.

They are also facing stiff competition from low-cost carriers such as Ryanair Holdings in Europe and Southwest Airlines in North America.

Established airlines, which have high fixed costs and find it difficult to adjust capacity to sudden changes in demand, are also looking to smaller jets to help them increase flexibility.

"This will allow us to fly profitably to smaller markets as well as offer higher frequency to larger markets during periods of lower levels of travel demand," said Air Canada's Milton.

Austrian Airlines' Sorensen said the method of joint-ordering planes could also be applied to a larger craft.

"The suppliers don't see this as a threat. They know we're going to bargain hard, but on the other hand they also realize the opportunity for much larger streams of deliveries."

Global airline groupings such as Star Alliance, oneWorld and Sky Team allow carriers to combine frequent flyer programs and sell seats on each other's routes, giving customers a greater choice of travel times and destinations.

Star Alliance head Jaan Albrecht told an industry conference Friday the group's 15 members, which also include United Airlines and Singapore Airlines, were considering the joint purchase of jet fuel as another means of reducing costs.