Boeing Co. (BA) and Airbus SAS leave the Dubai Air Show with diverging prospects for their order momentum, with the Boeing 777X set to be a global hit while the Airbus A380 risks becoming a niche jet for Mideast carriers.
The aircraft manufacturers announced about $179 billion in combined transactions, more than the gross domestic product of New Zealand, with Boeing and Airbus each scoring record commitments for the re-winged 777 and the A380 jumbo. Buyers were largely limited to the Middle East, underscoring the region’s emergence as the new epicenter of aviation.
Boeing surfaced as the winner from the Dubai expo, where it surpassed 1,000 orders for the 787 Dreamliner and made the 777X launch the most successful ever for a large aircraft. While Emirates’ order for 50 additional A380s breathed fresh life into a program plagued by scant demand, Airbus has yet to prove the jet’s broader appeal as many airlines hesitate to add the super-jumbo to their fleets.
“There’s an awful lot to play for,” said John Strickland, director at JLS Aviation Ltd., an advisory firm in London. “These headline orders from blue-chip companies do influence others in their decisions, so both manufacturers will be fighting for every order they can get.”
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Etihad Airways PJSC from Abu Dhabi was the most prolific buyer after Emirates, adding 25 777Xs and 30 Dreamliners, and turning itself into the largest customer of Boeing’s composite-material jet in the process. Absent from the deals were European, Asian and North American buyers as well as leasing companies, which typically form a large portion of sales.
This year’s event eclipsed the last expo two years ago, when Chicago-based Boeing narrowly pulled ahead of Airbus, with $19 billion of deals versus $17.6 billion. Boeing held a wider lead at this year’s event over its Toulouse, France-based rival, scoring $129 billion in orders, compared with $50 billion for Airbus.
Emirates has managed to make its A380 a success in part because it built a growth strategy around the aircraft rather than making it an exotic component of its fleet, as is the case with most other operators. The state-owned carrier also flies the planes to destinations considered by competitors as second-tier airports, such as Manchester in northern England, helping Emirates funnel more traffic through its Dubai hub.
“They made a bet and they won the bet,” said Airbus Chief Executive Officer Fabrice Bregier. “They gained market share and they don’t understand why some of the airlines are so shy. This is to their advantage.”
Boeing’s new 777X aims to replicate the success of the existing model, which forms the backbone of many long-haul fleets, including Emirates. The world’s largest airline by international traffic is buying 150 of the new planes to replace its current lineup, in the biggest purchase yet by value, at $76 billion. Boeing announced all its major orders in rapid succession on the first day of the Dubai show.
“We see broad, worldwide demand for the 777,” Boeing CEO Jim McNerney said. “We are just starting here.”
The success of the 777X, which comes in a large 405-seat and a smaller version, comes at a cost to Boeing. The plane eats into already weak demand for the 747-8 jumbo, for which Boeing has cut output twice this year. McNerney said there is “no question” that the 777 puts pressure on bigger jets.
Airbus sought to play down the success of the 777X, saying its own A350-1000 is an all-new design rather than an upgrade from an existing frame and will fly years before the 777X. The model garnered 10 orders from Etihad at the show, and has also been bought by Emirates and Qatar Airways Ltd.
Besides the disproportionately large orders, the Middle East is exceptional in that wide-body sales dominate, an anomaly in an industry where smaller single-aisle models are the workhorses of most carriers. Boeing, which lagged Airbus in market share for short-haul planes in the region, made a dent in its rival’s lead with a deal for as many as 111 jets from FlyDubai. Etihad bought 36 Airbus A320-family models.
Airbus still has one order for the A380 to confirm, from leasing company Doric, which said in June that it would buy 20. Before the Emirates repeat purchase, Airbus was at risk of failing its annual order goal for a third straight year. With Emirates proving to competitors that it can make the aircraft work, Airbus said other carriers are sure to follow.
“A lot of airlines get into trouble because they are risk averse,” said John Leahy, Airbus’s sales chief. “Emirates is a profitable airline that’s eating their lunch. They’re the best marketing tool we have.”
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