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ORDERS SEEN WORTH $500bn

Mini-jumbo war beckons as Boeing starts selling 777X

Seattle, May 2, 2013

 

Boeing has started offering its long-awaited 777X long-range jet, paving the way for a 'mini-jumbo' war with European rival Airbus which would carve up a potential market of at least 2,000 aircraft worth about $500 billion over 20 years, industry sources said.
 
The move backed by Boeing's board means that the commercial aircraft division can begin taking orders for a revamped version of its top-selling wide-bodied jet, the 777, which could include folding wingtips and new engines from General Electric.
 
Boeing declined to discuss the outcome of Monday's board meeting but said it was pushing ahead with the project to update the twin-engined jet, in service since the 1990s.
 
"We are taking the next step when it comes to engaging customers on the 777X," spokesman Doug Alder said. The company has "begun to discuss additional technical, pricing and schedule details with customers", he added.
 
Reuters reported on April 24 that Boeing was ready to go ahead with the project "within weeks", after one of its key customers, British Airways, placed a $6 billion order for A350-1000 jets from rival Airbus.
 
Until now, Boeing has enjoyed a virtual monopoly in the lucrative market for large twin-engined jets, boosting its margins, but Airbus has started challenging that position with its 350-seat A350-1000, due to enter service in 2017.
 
Boeing's response is a substantial overhaul in the design of the 777, expected to enter service around 2020.
 
People familiar with the matter said the Boeing board had approved the so-called "authority to offer", allowing sales to proceed. The people declined to be identified because they are not authorised to discuss actions of the board.
 
After attracting enough orders, Boeing would go back to the board for permission to start developing and building the jet.
 
If launched, the programme would bring billions of dollars of business to suppliers of aircraft parts. In March, Boeing chose General Electric to develop the engines, renewing their exclusive partnership on the most recent 777s.
 
The 777X is a planned successor to the industry's most popular large twin-engined aircraft seating more than 300 passengers. The original 777 was introduced in 1995 and is the last new plane Boeing developed before the 787. Its most popular version is the more recent 777-300ER.
 
The 777X would compete from around the turn of the decade with the Airbus A350-1000 to carve up a potential market of at least 2,000 aircraft worth about $500 billion over 20 years.
 
The cost of the 777X development has not been dislcosed but after industrial delays followed by a grounding of its 787 Dreamliner, Boeing will hope that upgrading a familiar jet costs significantly less than the $15 billion for an all-new aircraft.
 
"Boeing has been waiting to see what happened with the A350-1000, and the BA order clearly swung their decision," said Agency Partners analyst Nick Cunningham in London.
 
"It could be an awesome competitor, given the success of 777-300ER, but I suspect it will end up having most of the cost and risk of a complete new programme."
 
Emirates, which runs the biggest fleet of 777s, is among those clamouring for the cost-saving 777X as early as possible.
 
Airbus says that its carbon-composite A350 is lighter and cheaper to run than the 777X, which will keep a metallic body. Boeing is expected to argue that an all-new wing and new engine will make the 400-seat 777X cheaper to operate per seat.
 
Industry sources say that Boeing has been offering the plane informally for months, while fine-tuning the design with focus groups of airlines and lessors. It has also been offering a stretched version of its 787 Dreamliner after a similar but unannounced board decision taken late last year, they added.
 
Until this week Boeing had held off granting the formal "authority to offer" the 777X as it juggles the looming threat from Airbus with the need to avoid undermining the value of a large order backlog of existing 777s.
 
Now that the 777X is being offered to customers, the next move could begin within 12 months, making the end-of-decade timetable feasible, analysts said.
 
Timed to dominate discussion at the June 17-21 Paris air show, Boeing's decision allows the 777X to go head to head with the A350-1000 in contests at big hitters such as Japan Airlines or Gulf carriers led by Dubai-based Emirates.
 
After losing to Airbus on part of British Airways' fleet renewal plans, industry sources say that Boeing is already in informal talks to persuade the European airline to place a parallel order for the main model, the 777-9X.
 
The 777-9X would have about 406 seats and a range of more than 8,100 nautical miles, aiming to leapfrog the 350-seat A350-1000, two sources briefed on Boeing's plans said.
 
It would have a new carbon-composite wing and folding wing tips to increase wing span without needing more parking space, which would incur additional airport fees. Boeing also is thought to be considering a smaller, longer-range 777-8X.
 
The head of Qatar Airways said on Wednesday that he would be "very interested" in both models.-Reuters 



Tags: airbus | Boeing | aircraft |

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