Boeing Lands Another Major Aircraft Order
Malaysia Airlines on Tuesday ordered 25 Boeing Co. wide-body jetliners valued at $4 billion, giving Boeing its second multibillion-dollar victory over rival airplane makers in as many months.
The sale is another sign of how the commercial aircraft industry is rebounding from its severe slump in the early 1990s, and how that rebound is being fueled by Asia-Pacific carriers that need long-range, wide-body aircraft to serve their bustling economies.
Malaysia Airlines’ order for 15 of Boeing’s new 777 twin-engine airliners and 10 of its venerable, four-engine 747 jumbo jets follows Singapore Airlines’ decision in November to buy as many as 77 of Boeing’s 777s for $12.7 billion.
The sales by Seattle-based Boeing, the world’s biggest jetliner manufacturer, deal stinging blows to its chief rival, Europe’s Airbus Industrie. The consortium was shut out of both orders even though Malaysia Airlines and Singapore Airlines already have Airbus planes in their fleets or on order.
“Obviously we’re disappointed,” said David Velupillai, a spokesman for Airbus at the consortium’s headquarters in Toulouse, France. “Malaysia Airlines remains a large A-330 operator and we were pitching for the deal,” he said in reference to Airbus’ wide-body jet.
The world’s other major aircraft builder, Long Beach-based Douglas Aircraft Co., also lost out, but it has been struggling to sell its wide-body, the MD-11, to anyone. The unit of McDonnell Douglas Corp. is doing better selling its single-aisle MD-80 and MD-90 jetliners.
Despite the upswing in aircraft orders, it has been a buyer’s market for the airlines because fierce competition is prompting the manufacturers to offer hefty price cuts.
“All three manufacturers are coming out of a very deep recession,” said Shane Matthews, an analyst at the investment firm James Capel & Co. in Singapore. “To get orders, they’ve been forced to give very steep discounts.”
Indeed, Airbus’ Velupillai denied a newspaper report in The Times of London on Monday that said Airbus offered to slash its A-330 price a whopping 40% to win the Malaysia Airlines order. He declined to elaborate.
Seddik Belyamani, a vice president for international sales at Boeing, also would not discuss pricing details. But he said Boeing “has been more and more successful” at convincing airlines to pay prices that better reflect the value of its planes’ features.
“Airlines are giving us credit for all of these features, and we’re not having to discount as much as we did at the beginning” of the industry’s rebound, Belyamani said. (The 777 carries a list price ranging from $128 million to $167 million, depending on options and other features requested by the customer.)
But some analysts expressed skepticism.
“I don’t think we’re at the point yet where the price competition has lessened,” said Bill Whitlow, an analyst at Pacific Crest Securities in Seattle.
The plane makers’ prospects began improving last year when they received combined orders for 566 aircraft--their best results since 1990.
U.S. airlines, which are again earning robust profits after losing billions of dollars in the early 1990s, have remained cautious about purchasing new jets, although United Airlines is among those that have ordered the 777.
But Asian carriers are aggressively ordering new planes. Douglas Aircraft, in a 20-year forecast issued last summer, said Asia-Pacific airlines will need nearly 4,000 jets costing $410 billion over the next two decades--or 40% of the world’s total demand--because they “will produce the fastest traffic growth” of any region, averaging 8.3% a year.
“The Asia-Pacific region is pulling up the growth of air travel worldwide, and therefore they need more airplanes,” Belyamani said.
And so far it’s Boeing that is best tapping into that demand, with the new 777 especially popular among Asia-Pacific carriers. Of the 245 firm orders for 777s so far, 58% were placed by Asian carriers, Boeing said.
Despite the latest order, Boeing’s stock followed the broader market lower Tuesday, losing $2.375 a share to $77.875 in New York Stock Exchange trading.
Times wire services contributed to this report.