What The Boeing Company's Historic Order Win Means for Aviation Stalwarts

Emirates mammoth order for the 777X signifies Boeing’s wide-body jet has a long way to go, and puts Airbus on tenterhooks.

Jul 21, 2014 at 6:07PM

Boeing (NYSE:BA) recorded its biggest 777X order win of 150 jets from Emirates after the latter finalized the $56 billion deal last week. Emirates' firm commitment to the American aerospace major comes as another big blow to Airbus (NASDAQOTH:EADSY). The Gulf airline cancelled an Airbus order for 70 A350s worth $21 billion at list price in June. Does this signal a deeper relationship between Boeing and Emirates, and a heightened rivalry between the American jet maker and the European major?

Boeing 777-9X, Source: Flickr

Boeing-Emirates relationship deepens
The Dubai-based carrier placed the order at the Dubai Airshow last November where the 777X program was unveiled, making it one of the best-ever launches in aviation history. The confirmation came in July. In addition to the 150 jets, Emirates has reserved purchase rights to order for 50 more. After cancelling its A350 order, chances are strong that Emirates will exercise the option.

The airline would be purchasing both the 777X variants -- 115 of 777-9Xs and 35 of 777-8Xs. The 777-9X, which can haul 400 passengers, is the costlier version with a list price of $377.2 million, while the 350-seater 777-8X would cost $349.8 million at list price. The deal's value will increase to $75 billion if Emirates exercises its purchase right. However, plane valuation firm Avitas says that as there are massive discounts for big orders, the true price of the 150-jet deal should be around $31 billion. 

The order makes Emirates one of the first airlines to be flying the GE-powered twin-aisle jet capable of carrying the same load as a jumbo. Emirates president Tim Clark said that with the 150 777X order, Boeing now has total orders for 208 777s that are yet to be delivered to the airline operator. Presently, the Gulf operator flies 138 777s. 

Boeing 777, Source: Flickr

The 777 edge
The 777 family, dubbed as the mini-jumbo, has been Boeing's best-selling wide-body aircraft. With the next-generation 777X, the plane maker expects to usher in a new wave of growth.

Boeing will start production of the 777X in 2017 and begin delivering the aircraft in 2020. This version is being developed on the tried and tested technology of the 777 and 787 Dreamliner that will not only help to integrate cutting-edge technology in the jet, but will also minimize development cost. Boeing claims that the 777-9X's engine is 12% more efficient than competing jets in this segment, while 777-8X offers 5% higher efficiency over contending aircraft.

The Boeing-Airbus contest continues
Dubai is an important air link, connecting Europe and Asia. This makes Emirates demand larger jets. It's the largest international airline operator by traffic and the biggest operator of Airbus' A380 and Boeing's 777. As Emirates operates in some of the busiest long-haul routes, it finds the ultra-long haul 777-8 and the 777-9 aircraft -- larger than A350-900 and the A350-1000, respectively -- to be better fits. 

Emirates wants Airbus to overhaul the 500-seater A380s with the new Rolls Royce fuel-efficient engines by 2020, but the aero major has not committed so far. With Boeing's 400-seater 777-9X gaining traction with the airline, Airbus could be feeling the heat.

Emirates A380, Source: Flickr

However, Airbus can take heart from the fact that Emirates' move is part of the airliner's strategy of structuring its fleet. An analyst at Edison Investment Research says that Emirates is trying to organize its fleet, placing the A380 as its mainstay jumbo jet, followed by the 777X, and finally the 787 that will cater to routes that have less passenger traffic. The airliner is aggressively expanding to cater to increasing traffic, meaning that there is a huge avenue of growth for both Boeing and Airbus.

The order cancellation has definitely spoiled Airbus' mood, but it isn't something new in the aviation industry. We've seen the 787 Dreamliner experience cancellations of 200 units. The fact that the A380 is central to Emirates' fleet strategy also ensures order flows in the future.

Foolish takeaway
The competition between Boeing and Airbus to win higher wide-body orders is in full swing. Since most of the demand for these planes is coming from the Persian Gulf, carriers like Emirates, Etihad, and Qatar Airways are going to play a key role in the duo's wide-body backlog. Though Airbus saw Emirates withdrawing orders, it's not the be all and end all of the European plane maker's business. For Boeing, the huge order win is an unbelievable opportunity.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That’s beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor’s portfolio. To see our free report on these stocks, just click here now.

ICRA Online and Eshna Basu have no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers