Boeing’s stretch 787 lands first order in $17B sale split with Airbus
The order from prestigious Singapore Airlines for 30 of the larger Dreamliners is a major boost for the launch of the 787-10X.
As it works to rebound from the grounding of the 787 Dreamliner, Boeing won the first order for the stretched version of the plane as it split a sale of jets with Airbus to Singapore Airlines valued at $17 billion.
The purchase is for 30 of the larger, 787-10X Dreamliner variant and 30 of Airbus’ A350-900s, Singapore Airlines said Thursday.
Boeing deliveries are due to start in 2018, contingent on the Chicago-based company’s formal commitment to a model it has been marketing since November.
The deal is a boost for the 787 after regulators ordered the global fleet parked for three months starting in January because of battery faults.
Backing from Southeast Asia’s biggest carrier may help Boeing rebuild momentum after Airbus secured more orders for its largest A350 model, which is being aimed at airlines previously loyal to Boeing’s 777 widebody.
“Singapore Air is exactly the sort of cornerstone airline that the aircraft makers like to launch a plane,” said Robert Stallard, a London-based analyst at RBC Capital. “It’s a strong endorsement of the -10 business case.”
The Dreamliner and A350 are competitors in the widebody market in which Toulouse, France-based Airbus has been trying to chip away at Boeing’s historic dominance. Those planes are typically used on the longest intercontinental routes and can sell for two to three times as much as single-aisle models.
The combined $17 billion price tag Singapore Airlines has put on its order suggests that the 787-10X costs about $279 million, though launch customers usually get even steeper discounts than those standard in the industry.
Boeing hasn’t yet published prices for the 787-10X. The 787-8 version retails for $206.8 million, and the 787-9 for $243.6 million.
Singapore Airlines granted an option for 20 additional A350-900s, which carry a $287.7 million list price each.
The carrier said it may convert those into orders for the larger -1000, which Airbus says is due in 2017 and costs $332.1 million.
“These new aircraft will provide opportunities to grow and renew our fleet and enhance our network,” Singapore Airlines CEO Goh Choon Phong said in a statement, calling the orders among the biggest in the carrier’s history.
The deal with Airbus, with deliveries in 2016 and 2017, is the third time the carrier has bought A350-900s and brings the total commitment to 70 jets.
“We are certainly pleased that one of the world’s premier airlines has selected to buy 70 firm A350 aircraft,” John Leahy, head of sales at Airbus, said by phone.
Lori Gunter, a Boeing spokeswoman, said the 787-10X offers “a compelling value proposition” to airlines. The bigger Dreamliner would seat about 43 more people than the 250 to 290 passengers on the 787-9, Boeing has said.
“Someone stepped up early, and it will probably create some momentum,” said Howard Rubel, an analyst at Jefferies in New York. “Singapore is one of those carriers that’s in the category of a very deliberate decision maker, one who sets a high standard for whatever it buys, and usually ends up in a position to be a leader in its market and others will follow.”
Rubel rates Boeing as a buy, and RBC Capital’s Stallard has an equivalent outperform rating on the shares.
Boeing rose 1.5 percent to $100.54 at the close in New York, the highest since Oct. 9, 2007, a day before the first of seven postponements in the Dreamliner’s initial delivery.
Airbus parent European Aeronautic, Defence & Space added 0.1 percent to 44.25 euros in Paris.
Boeing has designed the 787-10X to replace its 777-200 and compete with the mid-sized Airbus A350, which is due for its first flight within weeks.
The 787-10X does about 90 percent of all missions flown today by the smallest version of its 777 “and it does it significantly better,” Boeing Commercial Airplanes CEO Ray Conner told investors last week.
He also said that adding the 787-10X may force Boeing to add production capacity.
With an order backlog of more than 800 Dreamliners and monthly output set to double this year to 10 a month, the assembly tempo would have to increase for the larger version to reach customers this decade.
“Launching the 787-10 implies that Boeing would need to increase production,” said Yair Reiner, an Oppenheimer & Co. analyst in New York who rates Boeing as outperform.
“If today’s announcement takes it a step closer to 787-10 launching, it also takes us a step closer to Boeing increasing production beyond 10 aircraft a month.”
Airbus has booked 616 firm orders from 34 customers for its A350 family through April, including 110 firm commitments for the largest model, the -1000, with a deal from British Airways parent IAG to take 18 not yet in the backlog.
Singapore Airlines said it will make an engine selection later for the 787-10X, with offerings from General Electric and Rolls-Royce Holdings.
The plane will be used on medium-range routes, and the A350 on medium to long flights, the carrier said. The A350 comes only with Rolls-Royce engines.