Tuesday, August 1, 2017

Sheikh Ahmed Makes Boeing Sweat Bullets With Emirates Order

It has been a long wait for Emirates, Sheikh Ahmed to announce a mega deal for its airline. Background on the Emirates deal making can lend some insight but not a definitive outline who the Sheikh may deal out the wide body order.

Some history with Emirates and Airbus exist which makes it an interesting decision path. 

During June 2014, Emirates dropped the shoe on Airbus and canceled its entire 70 A350-900 order. It amounted a $21.6 billion Airbus embarrassment. After all, Emirates was a leading A-380 customer at this time. It has introduced 95 A-380's into its fleet with a remaining 47 Airbus A-380's on order. Emirates has a big Airbus interest muted by the A350 cancellation in 2014. The conclusion is a slight Airbus advantage before considering a waning super jumbo market dying.

Boeing, was a lady left at the order alter throughout Airbus' march into the UAE and has had a lot of time and change management on its hands since the first A-380 delivered. Boeing has since amassed 150 Boeing 777X orders, Thirty-five 777-8X and 115 777-9X. Similarly it has 139 777 classics in its fleet where the retirement for the 777 classics could coincide with its inducting its 777X order book. The 777X orders came after the Emirates A-350 cancellations. The conclusion is a significant Boeing advantage since Emirates is renewing its Boeing wide body fleet with the 777X.

The current order target is for the mid-wide body class. Emirates already passed on 70 A-350's it had locked down. Winging It assumes it was because the 777X was announced earlier and after Emirates' input regarding the design, range and 777X efficiency. 

Emirates wasn't ready for the 70 A350 it had ordered since the 777-300-ER was providing Boeing air cover for Emirates fleet requirements. It had so many A-380's on order, so cancel A-350's they did! The ordering has opened up again as the Emirate's fleet plans have matured to the point it can slot in either the A-350 or the 787 during the next 10 years. However, the A-380 is slowly turning into a Emirates white elephant causing a fleet strategy change, by using the 777X orders in its place as they retire its super Jumbo fleet over time. A note from Emirates to Airbus, "We don't want no stinking A-380 NEO". A second note from Boeing, "we rented space next to you at the Dubai Air Show". November is end of year-ish as the Sheikh could announce a mega order during the year's last quarter and still be spot on when he just announced it will be the end of the year for a wide body announcement. Enough of the announcements in one sentence.

Several have reported the deal is done and Boeing won, which makes sense when looking at fleet numbers and the A-380 descent in the market place. The A-350 is matched by the 787 at several levels. Perhaps Emirates doesn't need a 8,000 mile traveler with high density appointments. It may only need a high density traveler closer to home reaching Europe and the East as far as Perth Australia. A step up would be a 777-8X for "all" the far east destinations. Having a 787-9 order would fill any intercontinental requirements without it having to fill an A-380 with five hundred passengers. Once again the 777-9X 400 seat lay out would replace any half-filled A-380 route. The fleet combination of 787's and 777X's is a more deadly competitor than having a A350 fleet with an ailing A-380 as its stable mate. Emirates is looking for the right mixture for its fleet. Since the launch of the A-380, a lot has changed and Boeing got the memo to change and change they did. Boeing is looking down the barrel of an immense Dubai order this November as the Sheikh has indicated.