Sunday, November 12, 2017

Boeing wins big 787 deal at Dubai Air Show, delivering surprising early blow to Airbus

Emirates committed to buying 40 Boeing 787-10 Dreamliners. It was a surprise twist in the air show’s first-day choreography and one that marked twin setbacks for Airbus.

The news release was printed, the media invited, the first dignitaries began filing into the room. Such was the scene on the first day of the Dubai Air Show, when Airbus had planned to unveil a keenly awaited lifeline for its A380 super jumbos from the aircraft’s biggest fan: Emirates.

Instead: nothing. In fact, worse than nothing. An initial delay, not unusual at these major signing ceremonies, gave way to confusion. Bewilderment turned to humiliation when a model aircraft was carried into the briefing room and the gray cloth covering it slipped off — revealing the Boeing logo on its tail.

Out of nowhere, the U.S. planemaker suddenly conquered Room 6 on the upper level of the main exhibition hall, with its representatives taking the stage. Airbus officials who dominated the room on arrival quietly slipped out during the news conference as their rival landed a stinging blow: Emirates committed to buy 40 Boeing 787-10 Dreamliners plus related equipment with a list price tag of $15.1 billion. That was similar to the order value that Airbus had planned.

It was a surprise twist in the air show’s first-day choreography, one that gave Boeing a new blue-ribbon customer for its Dreamliner while delivering twin setbacks for the European planemaker:

First, the 787 beat out the Airbus A350. The Dubai-based carrier had originally ordered 70 Airbus A350 jetliners before pulling out of the deal in 2014 to review its requirements. Sunday, Airbus’ hopes of reinstating that order were dashed.

Second, an expected order for the A380 didn’t yet materialize, though it may still come later at the show.

With scant demand from other airlines for the double-decker A380, Airbus is more dependent than ever on Emirates.

“Boeing has scored an absolutely huge victory here. You can’t play it down,” said Saj Ahmad, an analyst at StrategicAero Research in London. “That all the talk was about the A380 and nothing materializing for Airbus was a bit of a dampener for the opening.”

The list price of 40 Boeing 787-10s is $12.5 billion. But because the advertised price of the deal was $2.6 billion higher, it must include significant aftermarket equipment and services — another big boost for Boeing which is newly focused on adding services revenue at the point of sale.

A separate Boeing firm order from Azerbaijan Airlines for five 787-8s, along with a commitment to buy two 747-8 freighters, had a total list price value of $1.9 billion.

That announcement also included a major additional services element: Azerbaijan will be the launch customer for the 787 Landing Gear Exchange Program whereby Boeing Global Services will provide overhauled and certified landing gear for its Dreamliner fleet, which now grows to seven airplanes.

After standard industry discounts, the true value of Boeing’s Sunday tally of orders and commitments for the 45 Dreamliners and two 747s is $7.1 billion, according to market-pricing data from aircraft valuation firm Avitas,

The extra equipment or services bought by Emirates and Azerbaijan should bring that close to $10 billion.

High-profile comeback possible for Airbus

Even with the first-day setback, Airbus has a knack for staging high-profile comebacks at major air shows.

Emirates is still expected to order about 36 A380s, according to people familiar with the negotiations — a deal that would carry a list value of about $15.7 billion and which would push the order book for the giant jetliner to more than 170.

Airbus and Emirates declined to comment on the back and forth of the negotiations.

Earlier this month, Emirates President Tim Clark took delivery of the 100th A380, cementing Emirates’ de facto status as the only buyer of Airbus’ biggest and most expensive aircraft.

The biennial Dubai expo is an important venue for both manufacturers to secure deals for their biggest and most expensive jetliners. Two years ago, orders slowed to just $4 billion, compared with more than $170 billion at the previous event, placed largely by the three major carriers in the region: Emirates, Qatar Airways and Etihad Airways.

The mood was more upbeat at this year’s event, with Clark saying demand remains strong, even for the most expensive seats. Clark unveiled a new first-class suite that will be featured on its Boeing 777 models and will be gradually rolled out across its entire fleet.

The air show is also a barometer for the region’s economic resilience following slumping earnings at the major carriers and political shocks that include Saudi Arabia’s recent purge of billionaires and princes in Saudi Arabia and a blockade of Qatar.

Because of the blockade, Qatar Air is absent from the event, which cuts out a prolific buyer of aircraft. Etihad is retrenching after a strategy to buy stakes in ailing airlines across the world backfired and the chief executive officer quit.

(Benjamin Katz and Anurag Kotoky - Bloomberg News / The Seattle Times)

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