Bloomberg News

Boeing Said to Near 777X Order Haul of Up to $87 Billion

October 30, 2013

Current Boeing 777 Model

A nearly completed Boeing Co. 777 reaches the end of a moving production line at the company's facility in Everett, Washington. Photographer: Mike Kane/Bloomberg

Boeing Co. (BA:US) is in talks with four airlines on orders for its redesigned 777X jetliner valued at as much as $87 billion ahead of next month’s Dubai Airshow, people familiar with the matter said.

The 255 planes under discussion include 100 to 150 for Emirates, about 50 for Qatar Airways Ltd. and as many as 30 for Etihad Airways, said the people, who asked not to be identified because the details are private. Cathay Pacific Airways Ltd. (293) is weighing as many as 25 jets, one person said.

An order haul before or during the Dubai event would be a boost for the 777X years in advance of its commercial debut, now targeted for decade’s end. Boeing is betting that it can keep Airbus SAS at bay in the market for the biggest twin-engine jets by upgrading the current 777, not by building an all-new plane as its Toulouse, France-based rival is doing with the A350.

“They’ve got a very strong product and they’ll get a very strong launch,” said Richard Aboulafia, an aerospace analyst with Fairfax, Virginia-based consultant Teal Group. He said Airbus will “have to do something in that segment” to compete with the 777X.

The Dubai expo runs Nov. 17-21 and is often a showcase for wide-body jets like the 777, because Persian Gulf carriers such as Emirates and Abu Dhabi-based Etihad focus on long-haul flying. A Cathay order may come before the show, one person said.

Record Start?

A purchase of 100 or more of the new 777s by Dubai-based Emirates would be Boeing’s largest-ever initial tally, surpassing the 50-jet order valued at $6 billion from Japan’s ANA Holdings Inc. to introduce the 787 Dreamliner in 2004, when the plane was still known as the 7E7.

“We don’t comment on possible negotiations,” Marc Birtel, a spokesman for Chicago-based Boeing, said in a telephone interview.

Marco Larsen, a Qatar Airways spokesman at Public New York City, said he couldn’t immediately comment. Etihad said it had no comment, and Arielle Himy, an Emirates spokeswoman at MSL Group, said she couldn’t immediately comment on the orders.

“We do not comment on market rumors,” Elin Wong, a spokeswoman for Hong Kong-based Cathay Pacific, said in an e-mail. “We will continue to evaluate all available aircraft models for our fleet needs.”

Boeing’s emerging success with the 777X follows setbacks this year with the 787 Dreamliner, its most technologically sophisticated model. The global fleet was ordered parked for more than three months after lithium-ion battery meltdowns on two 787s.

Shares Rise

Boeing was little changed at $129.68 at the close in New York, leaving the stock’s year-to-date advance at 72 percent. Cathay, which also ordered Airbus’s A350-1000, added 1.1 percent to HK$15.38 in Hong Kong, extending its year-to-date gain to 8.2 percent.

For the 777X, Boeing is adding 50 more seats to the largest current 777 variant so it can seat as many as 400 people. The redesigned plane will feature the biggest engines ever and a wider, fuel-saving wingspan that can be shortened by having the tips fold up after landing.

Fresh 777X sales would build on Boeing’s momentum after Deutsche Lufthansa AG (LHA) agreed last month to buy 34 of the planes. While the 777X’s list price hasn’t been made public, the Lufthansa order implied a retail price of about $340 million, according to Peter Arment, a New York-based analyst with Sterne, Agee & Leach Inc. Buyers typically get a discount.

Fortress Breached

Earlier this month, Boeing’s decades-long dominance in jetliner sales to Japan cracked as Airbus won its first order from Japan Airlines Co., a deal for A350-type aircraft worth $9.5 billion.

“Boeing is banking on the new variant of the 777 to defend its market share from Airbus’s A350 series,” said Kelvin Lau, a Hong Kong-based analyst at Daiwa Securities Group Inc. Airbus plans to hand over its first A350 to Qatar Airways toward the end of 2014. The aircraft had won 756 orders at the end of September from 38 customers.

Emirates is likely to be the so-called launch customer for the 777X, Robert Stallard, an RBC Capital Markets analyst, wrote in an Oct. 28 note. The term refers to the first buyer to fly a new plane; Lufthansa said in September it would get its own first 777X in 2020.

Emirates President Tim Clark has been urging Boeing to deliver the new plane as early as possible.

‘Enormous’ Plans

“The scale of what we are contemplating is enormous,” Clark said in an Oct. 1 interview, while declining to elaborate on the potential purchase size. He said the airline, the largest operator of the current 777, intends to replace 175 of those aircraft with the new model.

The airline is studying “ways and means” to accommodate an order for 30 more Airbus A380 superjumbos, Clark said in an interview in January. The carrier is also the No. 1 operator of the world’s biggest commercial jet.

Emirates has a history of unveiling eye-popping deals at the marquee aerospace event hosted during odd-numbered years in its home city.

During the last such show in 2011, Emirates unveiled an order for 50 of the 777-300ER model, valued at about $18 billion at list prices, and options for 20 more. At the time, it was the largest order by dollar value in Boeing’s history. Indonesia’s Lion Air surpassed it days later with a $22.4 billion agreement to buy 230 Boeing narrow-bodies.

Some descriptions of the new 777X orders have begun circulating ahead of the show. The Financial Times reported this week that Emirates was considering an order valued at $30 billion or more. People familiar with the Etihad sale discussed that transaction last week.

The 777X will boast the biggest engines ever from General Electric Co. (GE:US), and the first model, the 777-9X, will be able to fly as far as 8,000 nautical miles (14,800 kilometers) with more than 400 passengers while burning 20 percent less fuel than the current 777.

A second variant, carrying about 350 people, will push past 9,400 nautical miles, enough to go nonstop from New York to Singapore.

To contact the reporters on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net; Andrea Rothman in Toulouse at aerothman@bloomberg.net; Tim Catts in New York at tcatts1@bloomberg.net

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net; Ed Dufner at edufner@bloomberg.net; Anand Krishnamoorthy at anandk@bloomberg.net


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