Korean Air, South Korea’s top carrier, has agreed to buy 10 787 Dreamliner jets worth $1.3 billion from Boeing Co., marking a victory for the US firm in the growing mid-sized passenger jet market.

Boeing is locked in a fierce battle with European rival Airbus to grab a bigger slice of the fuel-efficient mid-sized airliner market.

The purchase is the first of the 787 by Korean Air, which has a $10 billion spending plan for aircraft purchases, inflight service upgrades, information technology enhancements and other projects over the next 10 years.

“Boeing’s 787 airplanes fit well into Korean Air’s shuttle services business in Asia,” said Song Jae-hak, a transport analyst with Woori Investment Securities.

“Korean Air’s expansionary drive leaves the door open to further Boeing purchases. But it doesn’t necessarily mean Airbus will remain out of the list. For strategic purposes, global airlines are not wholly reliant on one aircraft maker.”

Korean Air said in a statement the purchase, with a list price of $1.3 billion, was part of its plans to meet future demand for travel on mid-to long-range routes. The actual price of the deal was not disclosed.

Deliveries of the planes are due from 2009 through to 2011.

“This airplane deal signifies our commitment to our vision of becoming one of the world’s top 10 airlines by 2010,” Korean Air Chairman and Chief Executive Cho Yang-ho said in a statement.

The 787s will replace aging A300-600 aircraft being phased out of the fleet.

Betting small

The 787 Dreamliner is the linchpin of Boeing’s bet that airlines will mainly want smaller planes for travel between regional airports rather than Airbus’s double-decker A380 superjumbo, which would bring larger numbers of passengers into “hub” style airports.

Korean Air previously ordered from Airbus five A380s to add to its fleet beginning in 2007.

Airlines, many of which are struggling to contain record losses amid surging fuel prices, are striving to find ways to improve operating efficiencies.

Boeing expects its new Dreamliner to capture about half of the mid-sized passenger jet market, whose size is estimated at around 3,500 airplanes, a senior Boeing engineer said last week.

While the Korean airline remains vulnerable to high global oil prices, market watchers say its outlook has been underpinned by a rise in passenger numbers and air cargo on high margin routes to China, Europe and the United States.

The firm, the world’s second-biggest air cargo carrier, is targeting more than 7.8 trillion won of sales in 2005 and more than 600 billion won of operating profits.

Korean Air, which currently has a fleet of 115 aircraft, is a founding member of SkyTeam, a global airlines alliance partnering Aero Mexico, Air France, Alitalia, Delta Air Lines and others. (Reuters)