Qatar Airways announced an order from Boeing for 30 787-9s and 10 777-300ERs widebody jets and an additional letter of intent to order a further 60 single-aisle 737 MAX 8s. The order could help avoid a 777 production rate cut and job losses in Everett.
Qatar Airways announced Friday a firm order from Boeing for 30 787-9 Dreamliners and 10 777-300ERs widebody jets and an additional letter of intent to order a further 60 single-aisle 737 MAX 8s.
According to data from aircraft valuation firm Avitas, the full 100-jet order — which is valued at $18.6 billion at list prices, assuming the MAX order is finalized — is worth an estimated $8.8 billion after standard industry discounts.
The sale throws Boeing a lifeline in a year when airplane orders, especially widebody jet sales, have slowed to a level bringing fears of a downturn ahead.
This is the largest Dreamliner order since 2013. And the smaller order for 777s will go at least some way toward bridging the yawning production gap ahead of the ramp-up of the new 777X early in the 2020s.
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At a press conference with Qatar executives in Washington, D.C., Boeing Commercial Airplanes chief Ray Conner called the deal “a huge boost for the 777 program, as it is for the 787 program.”
Before the announcement, Boeing had just six net orders this year for its 777 jet.
Boeing has already announced it will cut 777 production from the current 100 jets per year to 66 per year in 2018. It also signaled in August that a further cut is threatened without more 777 orders — a move that might trigger layoffs in Everett.
It’s unclear how far an order for just 10 of those planes will go toward avoiding another rate cut, but Conner seemed optimistic.
“We’ll just have to wait and see how the rest of our order stream plays out,” Conner said. “But I can tell you, 10 777s is a big deal. And where these airplanes fall within our delivery stream is extremely important to us in terms of what we do with our production rates.”
But some analysts were dubious.
In a note to clients, Rob Spingarn of Credit Suisse said “this sale is a welcome boost, but represents less than 2 months of production,” adding that “we still believe a further rate cut is forthcoming.”
Bainbridge Island-based aviation analyst Scott Hamilton of Leeham.net said 10 planes won’t make that much difference.
His analysis of the production gap prior to the Qatar order shows 39 unsold 777 delivery slots in 2018 and 49 in 2019 even at the slowed rate of 66 jets per year.
Hamilton said the Qatar order is “still very inadequate to fill the gap.” And he’s also dubious about the solidity of Qatar’s “letter of intent” to buy the MAXs.
He points out that in the language of airplane sales announcements, the ranking of solidity slips down from firm orders to options to a “memorandum of understanding” and finally to a “lettter of intent.”
“That’s smoke and mirrors,” said Hamilton, “It’s a poke in the eye for Airbus, that’s all it is.”
Qatar Airways CEO Akbar Al Baker this summer was publicly critical of Boeing rival Airbus over delays to the airline’s A320neo jet deliveries due to problems in getting enough engines from Pratt & Whitney.
At Friday’s press conference, Al Baker said the airline will not cancel its sales contract for 50 Airbus A320neos, which is the competitor jet to the Boeing MAX.
But he praised the MAX as “reliable” and said it will provide “a firm delivery schedule.”
The timing and location of Friday’s announcement was clearly determined by the politics of a major U.S. arms sale to Qatar.
The finalizing of the widebody jet order comes shortly after the U.S. government signaled approval to let Boeing sell 36 F-15E jet fighters, reportedly worth about $4 billion, to the Qatar government, a close ally of the U.S.
Al Baker denied any linkage, saying, “Nothing is attached to anything.”
However, the political element of the commercial relationship was underlined by the presence at the press conference of Qatar’s minister of finance, Ali Shareef Al Emadi, who is also chairman of the airline; Qatar’s Ambassador to the U.S., Mohammed Jaham Al-Kuwari; and Tony Blinken, the U.S. deputy secretary of state.
Al Baker also took the opportunity to take a swipe at the campaign by American Airlines, Delta Air Lines and United Airlines to curtail access to U.S. destinations by the three large Gulf carriers, including Qatar.
The U.S. airlines allege that the Qatar government subsidizes the airline, creating unfair competition.
Al Baker said the commercial terms of deals such as the Boeing order should take precedence over “the vested interest” of competitors.