Lufthansa Converts 14 Boeing 777X Orders To Options   

Lufthansa has announced that it is pulling back from part of its Boeing 777X order. Originally the airline placed a firm order for 34, but as of yesterday, it switched 14 of these aircraft to options. That leaves the German airline with just 20 firm orders for the type. For Boeing, this represents a loss of firm orders to the tune of $6.2bn.

Lufthansa 777X
Lufthansa now has just 20 firm orders. Photo: Lufthansa

Cutting costs

It seems Lufthansa is banking on slowing its fleet growth in a bid to trim operational costs. As of yesterday, a large portion of its 34 strong firm order for the forthcoming 777-9 has been switched to ‘options’ instead. In total, 14 aircraft have been moved from firm orders, as was revealed in Lufthansa’s third-quarter earnings briefing yesterday. In the briefing, it said,

“In the third quarter of 2019, as part of new aircraft orders, the 14 B777 orders were contractually converted into options for which it is no longer sufficiently certain whether they will be exercised in the future.”

Lufthansa, Boeing, 777X Delivery Delay
The first Boeing 777X aircraft are assembled and awaiting their first flights. Photo: Lufthansa

According to AeroTelegraph, these 14 jets were never confirmed by the Lufthansa supervisory board, and thus had never really been entered onto Boeing’s books. However, by pulling back from any chance of an order, Lufthansa is bringing into doubt its need for those aircraft at all.

While not a classic cancellation, the transfer of the orders into options is not good news for Boeing.

Will Lufthansa take the 14 options?

Lufthansa was one of the first customers to order the 777-9 way back in 2012. As such, it was expected to become the launch customer of the type. The airline had planned a refreshed cabin with a good looing business class product. Although it will still likely be the launch customer and is set to take 20 of the type, that may well be all it takes.

Overall, Lufthansa is undertaking something of a review of its fleet. It has been firming up plans to get rid of some of its biggest jets, the A380s, and in March this year placed an order for the 787 Dreamliner to give it more fleet flexibility.

Lufthansa 787 A350 order
The Lufthansa Group also ordered 20 A350 aircraft from Airbus. Photo: Lufthansa

Alongside the 787, Lufthansa has also ordered 20 A350-900s to be deployed across the group. These slightly smaller, highly efficient aircraft will allow the airline to consolidate its strategy and be more responsive to the market demands going forward.

Not expecting deliveries in 2020

As part of the Lufthansa Group’s analyst call following the earnings release, Group CFO Ulrik Svensson noted that there is no expectation of aircraft being delivered in 2020. Previously, it had been expecting four to be delivered by the end of next year. CAPA reports that the airline is now reconsidering the spacing of future aircraft deliveries given the current “muted market growth compared with historic levels”.

Lufthansa 777x
Production delays have been a big setback for Boeing. Photo: Lufthansa

The 777X has been hit with delay after delay, from issues with the GE9X engines to a door blowing off during a pressure test. As such, the first flight, which should have happened this summer, is now expected in the early part of 2020. As such, airlines are no longer expecting deliveries until 2021.

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In-Frequent Flyer

I thought they always had a firm order for 20 with options for more. Even so, given that the 777x will find a use as a replacement for the A380 on some routes, lufthansa’s aircraft aren’t that old. They can afford to hang on to it for a little longer.

Gerry Stumpe

Why so many spelling errors in your articles?

Frank

Probably a wise choice with a recession right around the corner. We’ll probably be reading about more carriers doing the same thing or deferring orders, over the next little stretch. Batten down the hatches, folks…

Peter

Perhaps the beginning of the end for the 777-9. The Emirates and Qatar orders are also shaky.

Karl

IMHO, the 777X will likely go down in history as a great strategic mistake by Boeing. They tried to counter the A350-1000 — which is manufactured on the same production line as the A350-900 — with what essentially is a one model programme (777-9) that’s re-using a relatively heavy legacy fuselage, without seemingly taking into consideration that Airbus should be able to match the 777-9 (in size) with a RR UlraFan powered A350-2000, stretched by 9 frames (5.7 m) — that would enter into service in, say, 2026. The UltraFan engine will have gearbox with a reduction ratio of 4:1… Read more »

Trent

Fascinating comment. I actually think that its Airbus the has the sizing issue in their line-up, but Boeing has squandered its advantage. The A380 is to big. A great plane fore sure, but way to big. With the A380 being to large, and leaving production soon, the A350, even in 1000 form is too small to compete at the very large end of the market. The A350 is more of a direct competitor to the 787. Which I believe is sized better than the A350. Airbus is better off on the smaller end of the market now that they have… Read more »

Karl

I would argue that the A330-800/-900 compete with the 787-8/-9, the A350-900 competes with the 787-9/-10 and 777-8, while the A350-1000 competes with the 777-300ER/777-9. By not taking into account the payload/range capabilities of the respective aircraft — which of course is an important metric for airlines when they’re choosing what type of aircraft that best suit their route network — we could just look at the cabin floor areas of the respective aircraft in order to get an idea of the size of the aircraft. ———————-Cabin Floor Area (roughly) 787-8————————232 m2 A330-800——————238 m2 A330-900——————266 m2 787-9————————266 m2 A350-900——————291 m2… Read more »

Karl

Addendum

The A350-1000 also competes with the 777-9.

Peter

When Boeing developed the 787, they marketed it as “the A330 killer”. When Airbus developed the A350, they marketed it as “the 777 killer”. – After the recent announcement of the 319 ton variant of the A350-1000, Airbus have a plane that’s lighter than the 777-8, carries as many passengers, can fly as far or further…and is available now (with seemingly reliable engines). Hence the wide-ranging belief that the 777-8 is a dead duck. – The 319 ton A350-1000 also maintains or improves upon those advantages when compared to the 777-9, with the exception that the A350-1000 carries about 40… Read more »

Trent

The A350 is closer than I realized to the A350, so take you “+”, but the 777X is still has more capacity than the A350, and the 787 range has a better spread (IMO) than the A330, which as you guys have pointed out, isn’t selling in droves. Airbus itself said the XWB was designed to compete with the larger 787 and smaller 777. The whole reason there is an XWB after A350 is because it couldn’t compete with the 787 and was sent back to the drawing board. Lets let the market decide. A380: Dead 747: Dead plane flying… Read more »

Paul Proctor

Agree. Boeing’s widebodies are better sized for the market.

Peter

It’s just a pity for Boeing that none of those new widebodies are free of technical controversies at the moment 🙁

Karl

Well, If you repeat to yourself something often enough, you will probably slowly start to believe it’s true.

Karl

@Trent Why did you leave out the A330 in your tally? Between the April, 2004 launch of the Dreamliner and the A330neo launch in July, 2014, the market was split almost equally between the A330ceo and 787, with around 1000 A330ceos sold against 1050 787 sold. Since July 2014 and through October 31, 2019 Airbus has logged 210 firm orders for the A330ceo and 272 firm orders for the A330neo. Hence, the A330 ceo and A330neo have slightly outsold the 787 since Boeing launched it in 2004. – Quote: “The whole reason there is an XWB after A350 is because… Read more »

Paul Proctor

With Rolls’ history with the Trent on the 787, I wouldn’t be so sure about the UltraFan and mooted A350-2000. And a 9-frame stretch? Not as simple as you make it sound. Finally, a conventional- fuselage 777X should be cheaper than composite A350, lowering acquisition cost. Remember, unless Europe ditches WTO, Airbus isn’t going to get these multi-billion subsidies anymore, which they effectively use to lower their jetliners’ price tags.

Peter

“Finally, a conventional- fuselage 777X should be cheaper than composite A350, lowering acquisition cost.”

Maybe cheaper to buy…but more expensive to fly 😉

Karl

@Paul Proctor Neither engine on the 787 met spec. The primary reason for this was Boeing’s decision to launch the 787 on a ridiculous and abbreviated four year development period, forcing RR and GE to design, develop and test fly the engines (on a 747) in just under three years from the launch of the 787 programme. The primary responsibility for the 787 engines issues lies primarily therefore with Boeing, and not the engine OEMs. A rushed design leads to a poor design and has a direct relationship to the number of testing and issues encountered. They both lead to… Read more »

Peter

– The Trent XWB on the A350 and the Trent 7000 on the A330 NEO appear to be doing just fine.
– According to Wikipedia, the 777-9 list price is $442 million, whereas the A350-1000 list price is $367 million.
– The WTO ruling against Boeing will be coming in a few months time, and then the fat tax breaks for Boeing will have to be flushed.

Nate Dogg

Airbus last got state aid on the A380. The neo programmes and the A350 have been developed from internal cash flow. Airbus no longer gets any commercial airliner development subsidies and has not for over 15 years. Rolls have had ONE snag in the Trent 1000 programme. Why don’t you chew down on the number of problems caused by the PW GTF? The numbers are far greater!

James

I guess there’s only so much you can do to improve any existing design/system/business process before you hit a diminishing or even negative return

Trent

Lufthansa loves the 7478i. Might be wise to back the delivery of the 777X up a bit.

Paul Proctor

I believe these 14 planes were never listed by Boeing as firm orders.

pavkoz

It’s just too big for most airlines, it’s quite niche, and like A380, Emirates would be the sole saver for this type. 10-abreast B777-300ER have been proven to be the maximum size that most airlines could fully optimized.