Bloomberg News

Etihad Closes In on Jet Orders as Emirates Lines Up 777X Splurge

October 02, 2013

Etihad Airways is evaluating orders for a range of aircraft from Boeing Co. (BA:US) and Airbus SAS (EAD) after Gulf rival Emirates said it’s planning an “enormous” contract for the U.S. company’s new 777X model.

Abu Dhabi-based Etihad is talking with manufacturers about jetliners that would meet its fleet requirements beyond 2020, Chief Commercial Officer Peter Baumgartner said today in Vietnam following the carrier’s inaugural flight there.

“We are in discussion with both manufacturers pretty much right across their entire portfolio of aircraft,” Baumgartner told reporters in Ho Chi Minh City.

Etihad and Emirates, together with Qatar Airways Ltd., are building immense wide-body fleets as they compete to turn their bases into hubs for long-haul transfer flights. Unlike its Gulf rivals, Etihad has also taken minority stakes in a range of smaller carriers, and Baumgartner said that a planned investment in Jet Airways (India) Ltd. (JETIN) is approaching final hurdles.

At Emirates, President Tim Clark said yesterday in Milan that the world’s biggest airline by international traffic is looking at an order to replace 175 twin-engine 777 wide-bodies that the carrier has in its fleet or awaiting delivery.

Boeing’s 777X model, which will feature an enlarged wing, upgraded engines and a longer fuselage carrying as many as 400 passengers, is “getting close to where we want it,” Clark said, with Emirates now negotiating commercial terms for a deal that could come as early as next month’s Dubai Air Show.

A380s, Dreamliners

Baumgartner declined to say whether the new plane, which still requires final approval from the Boeing board, could play a role at Etihad, which had 16 777-300ERs in its fleet as of July and three more due for delivery by the end of next year.

“Regarding the 777X, we don’t disclose at the moment where we are with discussion with the manufacturers,” he said. The larger of two planned variants, the -9X, has a list price of more than $340 million, based on a recent Deutsche Lufthansa AG order, Sterne, Agee & Leach Inc. analyst Peter Arment has said.

Etihad was operating 78 passenger and cargo jets in July, including 22 Airbus A330 wide-bodies and 12 A340s, and it has orders for 10 A380 superjumbos and 12 A350s -- a competitor to the 777 -- together with 41 smaller 787 Dreamliners from Boeing, with the fleet due to reach 159 planes by 2020. Emirates has about 200 aircraft and orders that would take the total to 400, excluding retirements, even before a purchase of the 777X.

Etihad Chief Executive Officer James Hogan said in August that the company is also exploring common procurement programs with the carriers in which it has minority stakes, and that coming aircraft orders could feature a “group deal.”

India Hurdles

Etihad has holdings in Air Berlin Plc (AB1), Virgin Australia Holdings Ltd. (VAH), Aer Lingus Group Plc (AERL), Serbia’s Jat Airways and Air Seychelles Ltd. The carriers together have a global fleet exceeding 500 aircraft, according to a slide Hogan showed at the CAPA Australia Pacific Aviation Summit in Sydney.

In India, Etihad faces a “couple of final regulatory hurdles” to securing the investment in Jet, the nation’s biggest publicly traded airline, Baumgartner said, adding that there is “some more work to be done, but we are confident.”

Asked whether his company will bid for a stake in Rome-based Alitalia SpA, where a share lockup is ending and partner Air France-KLM Group (AF) owns a 25 percent stake, he said that there is “nothing to comment on” at this stage, though Etihad remains open to new deals.

“We are certainly not closed for future partnerships if these partnerships make commercial sense,” he said.

To contact the reporters on this story: Jason Folkmanis in Ho Chi Minh City at folkmanis@bloomberg.net; Deena Kamel Yousef in Dubai at dhussein1@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net; John Boudreau at jboudreau3@bloomberg.net


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