Boeing sets sights on $2 bln United small jets order - sources

By Tim Hepher and Jeffrey Dastin
PARIS/NEW YORK, Jan 14 (Reuters) - United Airlines UAL.N
is close to deciding an order for about 30 small jets worth
around $2 billion at list prices and Boeing (N:BA) BA.N looks well
placed to win at least part of the deal after undercutting
smaller rivals, industry sources said.
A decision by the Chicago-based airline to pick Boeing's
737-700 jet would be a blow for Canada's Bombardier BBDb.TO ,
which has courted United as a key prospect for its struggling
CSeries, and potentially Brazil's Embraer EMBR3.SA as well.
United's requirement for 100-seat aircraft is in the natural
hunting ground for those manufacturers, but Boeing waded in with
highly competitive offers for its slightly larger 737-700, which
officially seats 126 passengers, the sources said.
Still, a deal has not been finalised and could face
last-minute shifts in negotiations that have already been marked
by heavy discounting, the sources said.
"It's the January sale," one source close to the talks said.
United said it did not discuss future fleet plans. Boeing
said it did not discuss market speculation. Bombardier, Embraer
and Airbus, another possible contender, also declined comment.
United is cutting the number of 50-seat jets it contracts to
others to fly under its United Express brand and moving towards
larger and more efficient planes flown by its own pilots.
United's tender for 30 or more 100-seaters ignited a fierce
battle at the lower end of the $130 billion annual jet market,
where the Airbus-Boeing duopoly is most under threat.
Bombardier is looking for a headline-grabbing win from a big
name such as United or JetBlue JBLU.O as its flagship CSeries
jet prepares to enter service after delays and cash problems.
Embraer is seeking an endorsement from an existing customer
with at least part of the deal, while analysts say Boeing is
keen to fill spaces in its production line as it prepares for
the transition to a new version of its single-aisle 737 series.
Airbus AIR.PA and Boeing have seen little demand for their
smallest single-aisle variants as demand surges for more popular
150-200 seaters. But they enjoy significant firepower to offer
discounts due to high overall volumes and low marginal costs.
One consoling factor for Airbus and Boeing from slow sales
of the 737-700 and A319 is that they can slash prices for those
planes without contaminating future deals, one source said.
Demand for both, and their future revamped equivalents, is thin.
Aircraft valuations expert Stuart Hatcher of UK-based IBA
Group said during an industry briefing that despite a recent
dearth of orders, the CSeries should increase its presence this
year. But he warned that the market for small jetliners could be
smaller than Bombardier hoped because of more new competition.