The year from hell just keeps getting worse for Boeing, with The Seattle Times reporting that Emirates is in talks with the aircraft manufacturer to defer part of its multi billion dollar order for 150 Boeing 777X aircraft. Emirates ordered the planes back in 2013. The list value of the order is USD$76 billion. The order represents nearly half of all the 344 orders Boeing has taken for the 777X.
The Seattle Times report says that Emirates CEO, Tim Clark, wants to swap out some of the 777Xs for Boeing’s 787, saying that the number of aircraft on order wouldn’t change, just the type of aircraft. The newspaper also reports that cancellation of the order or pushing it so far into the future that it’s much the same thing, isn’t an impossibility.
In further bad news for Boeing, Reuters reported late last week that cash strapped rival Etihad is “exploring options with Boeing to cancel or defer orders for 777X jets.” Etihad has 25 777Xs on order with Boeing.
It’s a blow for the 777X program. Boeing positioned the aircraft as a natural successor to the 747 and A380, but sales have been sluggish as customers have turned towards the 787 Dreamliner and alternatives at Airbus.
What Tim Clark had to say
The Emirates CEO told The Seattle Times that the cancellation of the A380 program earlier this year caused the airline to re-assess its 777X order. At the time, there was speculation that Boeing’s 777X was a driving force behind the cancellation of the program. The 777X could carry a similar number of passengers a similar distance far more efficiently.
Emirates has the world’s largest fleet of A380s and transits ten of millions of passengers a year through its Dubai hub. But now Emirates, like other airlines, is looking beyond the A380 and Dubai as newer, more efficient aircraft types force Emirates to rethink its Dubai hub model in order to meet market preferences.
Growth at Emirates has slowed down and the airline is looking beyond Dubai, exploring fifth freedom routes, and considering aircraft types that allow it to be more nimble and responsive to market opportunities. Emirates’ rapidly evolving competitive landscape would be part of the reason why Tim Clark felt he had to re-assess the 777X order.
Tim Clark told The Seattle Times that he was looking for,
“… a combination of the 150 777Xs and the 40 787s, essentially looking to keep the numbers in place, but substituting and spacing them out over a longer timeline.”
Those 787 orders refer to a 2017 order to buy 40 787-10s. Interestingly, Tim Clark notes that the letter of intent for this order wasn’t finalised and has since lapsed. He also told The Seattle Times that he was looking at swapping the 787-10s for 787-9s.
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These two orders with Boeing are in addition to a big order for smaller single aisle aircraft placed with Airbus earlier in 2019. This was after Emirates cancelled its order for outstanding A380s, effectively closing down the A380 production at Toulouse post 2021.
Why has the 777X fallen from favour?
There’s always been a lot of buzz around the 777X. The big Gulf carriers especially liked it, with 72% of Boeing’s order book made up from orders by Emirates, Etihad and Qatar.
The 777X is a large, fuel efficient plane, but it faces stiff competition from Airbus’s A350s. In addition, the A380s will still be around for a while yet.
In 2019, Boeing is pumping resources into the 787 Dreamliner because it is rolling off the production lines and generating cash for the company. The 777X, like most new aircraft types, has been beset with delays and teething problems. Its first test flight is set for later this month.
The aviation environment is becoming increasingly fluid. Airlines need to be responsive to survive and prosper. There is an argument that the gap between the order time and delivery time can see enough unanticipated changes in the aviation environment to render that order largely unworkable.
More so than most airlines, Emirates is operating in a dynamic environment. Its order book is, frankly, a mess. Tim Clark’s talks with Boeing may be an effort to clean up the order book, adapt to the current and future aviation environment, generate some efficiencies, and make some savings.
The outcome of the current talks are expected to be announced after the Dubai Air Show in November.