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Kireina
Emirates and Boeing Co. valued the unexpectedly large deal for an extended range version of the 777-300 at $18 billion — the total by list price — though the carrier is unlikely to pay that much. Airlines typically negotiate big discounts, especially when buying in bulk.
Emirates has an option to buy another 20 777s as part of the order. That would push the deal's face value to $26 billion.
The deal further establishes Emirates as Boeing's best customer for the twin-engine 777, a workhorse of the carrier's long-haul fleet.
Emirates has 95 777s in service and already had another 40 on the order books. That means it now has nearly as many of the twin-aisle planes on order as it operates.
"The 777 has really served Emirates very well in terms of the seat cost, especially when we see that the fuel price today is very high," Emirates Chairman and CEO Sheik Ahmed bin Saeed Al Maktoum said in announcing the deal.
Earlier this month, Emirates posted a profit of $225 million for the first half of its fiscal year. That was a 76 percent decline from what it made during the same period a year earlier, a drop it linked in part to soaring fuel prices.
Although the Gulf airlines are the among the world's most ambitious in expanding their fleets and routes, a deal the size of the Emirates contract had not been expected at the airshow, which began Sunday. It and rivals such as Abu Dhabi-based Etihad and Qatar Airways have a massive backlog of planes already on order.
Chicago-based Boeing Co. said the deal is the largest single aircraft order in dollar terms in its history.
"It sustains a lot of jobs in the United States — several thousand," said Jim Albaugh, president and CEO of Boeing Commercial Airplanes.
Boeing currently churns out seven 777s per month and expects to raise production levels to a rate of 8.3 of the planes a month soon, Albaugh said.
Emirates is by far the Middle East's largest carrier and has over 160 aircraft in service. It is owned by the government of Dubai, which is recovering from a debt-fueled financial crisis that came to a head two years ago.
Its young fleet also includes Airbus A330s, A340s and the double-decker A380.
Dubai's ruler, Sheik Mohammed bin Rashid Al Maktoum, attended Sunday's signing ceremony, underscoring the central role the carrier plays in the city-state's trade and tourism-dependent economy. Emirates' CEO is the ruler's uncle.
Emirates plans to pay for its additional 777s with a variety of financing options, including U.S. government-backed export credits, Sheik Ahmed said. He said the company doesn't expect to have problems securing funding and has financing for existing plane deliveries lined up through next August.
Among the nearly 240 planes Emirates has on order are 70 Airbus A350s, a new long range jet designed to compete against Boeing's recently introduced 787 Dreamliner.
Airbus parent company EADS NV last week took a 200 million euro ($273 million) charge to its third-quarter earnings because of the latest delay in the launch of the A350. The European plane maker now expects the A350 will enter service during the first half of 2014, up to six months later than previously forecast.
Sheik Ahmed said Emirates' decision to double down on the 777 "has nothing to do with the delays on the A350."
"It's part of the Emirates expansion. We always find new markets," he said.
Engine maker Rolls-Royce snagged two deals of its own at the start of the show.
The British manufacturer said it received an order from Saudi Arabian Airlines worth up to $500 million for engines and support for four Airbus A330s, as well as options to outfit four more of the planes. A second order from Garuda Indonesia Airlines for Trent 700 engines to power four Airbus A330s is worth $280 million at list prices, Rolls-Royce said.
Also Sunday, the European defense consortium Eurofighter said it has been asked by the United Arab Emirates air force to assemble a bid to potentially supply it with Typhoon fighter jets. The request follows preliminary discussions on the fighter that took place last month.
"We are now working hard to deliver a response" to the bid request, Eurofighter said.
The surprise move calls into question the UAE's plans to buy up to 60 Rafale fighter jets from France's Dassault Aviation. The French plane maker has been in talks with the UAE for several years over the fighters but has yet to close the deal.
Emirati officials in Dubai are getting an up-close look of the Typhoon and Rafale, which both saw action in NATO's mission over Libya. Both planes take flight during the show's afternoon flight demonstrations, as do American-made F-15, F-16 and F-18 fighters.
Posted in: Boing 777s,Emirates Airline,Finance
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