Emirates’ $18 Billion Boeing Order Kicks off Air Show

By Praveen Menon and Tim Hepher

An Emirates Airlines Boeing 777-300 aircraft takes off during the second day of the Dubai Airshow November 14, 2011. REUTERS/Nikhil Monteiro

DUBAI (Reuters) – Emirates airline placed a blockbuster order for 50 Boeing 777 jetliners at the Dubai Air Show on Sunday, underscoring the confidence brimming among fast-growing Gulf airlines despite growing fears of stalling global growth.

The Dubai government-owned carrier, expanding its role as the world’s largest operator of Boeing’s most profitable plane, said the deal was worth $18 billion, the largest commercial order by value in the U.S. planemaker’s history.

Reuters reported on Friday that Emirates, which has led efforts by Gulf-based carriers to challenge European and Asian carriers by establishing the region as a major East-West hub, would place an order of between 30 and 50 Boeing 777 aircraft.

“This order represents a milestone — it is the single largest dollar value (order) in the Boeing history,” Emirates Chairman Sheikh Ahmed bin Saeed al Maktoum said at a press conference, before signing the deal with Boeing representatives as Dubai’s ruler, Sheikh Mohammed bin Rashid al Maktoum, looked on.

“(The) 777 has served Emirates very well in terms of seat costs … especially when we see the fuel price is quite high.”

Fuel costs took a big toll on the airline’s first half profits, sending them down 76 percent.

Emirates said it had adequate financing in place for 2012, and planned no new bond issue. Sheikh Ahmed said the airline, which launched a heavily oversubscribed $1 billion bond in June, would consider a bond if needed and if the timing was right, adding “we don’t have a push.”

Including options to buy 20 more of the twin-aisle aircraft and other agreements, the total deal is worth $26 billion, Emirates and Boeing said.

The airline planned to eye a mix of funding options for the order, including Islamic finance, he added. Delivery of the aircraft is slated to begin in 2015.

James Albaugh, chief of Boeing’s commercial division, said the order would sustain thousands of U.S. jobs.

Boeing delivered 127 commercial airplanes in the third quarter, including 100 of its best-selling 737 narrowbodies and 21 widebody 777s. The planemaker, which gets paid for its airplanes at delivery, set its commercial airplane delivery guidance for 2011 at about 480, down from previous guidance of 485 to 495.

GULF CARRIERS SPLASH OUT

Gulf airlines and lessors are set to splash out on Airbus and Boeing jets at the November 13-17 air show, underscoring the region’s role as the industry’s chief paymaster amid Europe’s worsening sovereign debt crisis.

Qatar Airways is expected to place a $6.5-billion order for 50 fuel-saving A320neo jets and five A380s from Airbus , and Kuwait lessor Alafco plans to boost a provisional order for 30 Airbus A320neos, industry sources said.

A muted air show two years ago came days before Dubai lurched into its own property and financial crisis in 2009, but the city state has been recovering after a bailout from neighboring Abu Dhabi.
Dubai’s ruler Sheikh Mohammed spent hours at the airshow, looking at commercial and military planes and touring the floor before taking a seat at the Emirates news conference, underscoring the keen interest that the emirate has in the success of its airline and ambitions for Dubai to become a major hub.

Demand for passenger aircraft has been remarkably robust led by rising numbers of middle classes in Asia and the Middle East and a shift of economic power from the West, but some analysts fear a contagion from Europe’s spiraling debt crisis.

“Nothing goes up forever but we really believe the demand for airplanes is driven by world GDP,” Boeing Commercial Airplanes Chief Executive Jim Albaugh said on the eve of the show.

“It goes up by about one and a half times GDP, and while you have spikes .. the long-term direction is pretty positive.”

EUROFIGHTER CHALLENGE

Increasing competition to sell military hardware to Gulf states amid rising tensions over Iran’s nuclear activities also dominated the start of the show.

In a blow to France, an $11 billion contest to sell fighters to the UAE heated up on the eve of the event when the Eurofighter consortium disclosed it had been asked to present its Typhoon warplane to the country’s top military.

A spokesman for the consortium from Britain, Germany, Italy and Spain confirmed a report on the briefing in industry publication Flightglobal.com, but declined further comment.

The briefing by UK officials took place in October in response to a request from the UAE, which has held long-running talks with France over a purchase of up to 60 Dassault-built Rafale fighters.

The move injected unexpected drama into the military side of the Dubai Air Show, which will feature rival flying displays by both jets.

Dassault Aviation Chief Executive Charles Edelstenne shrugged off the assault by the Eurofighter club which France backed away from in the 1980s to concentrate on developing its own independent successor to the Mirage.

“That’s very good, I’m happy,” he told Reuters, walking briskly among displays of military U.S., European and Russian military hardware.

Asked if he was disappointed about the decision to bring in a potential new bidder, he said, “No.”

The UAE has been in talks with France since 2008 but discussions have been subjected to occasional disruption and the UAE has also enquired about the Boeing F/A18 Super Hornet.

President Nicolas Sarkozy has made it a priority to find a foreign buyer for the multi-role Rafale, billed as one of the most effective but also one of the most expensive fighter jets in the world.

Analysts say rising geopolitical tensions surrounding Iran could lead to a spike in defense orders.

(Additional reporting by Sitaraman Shankar and Nadia Saleem; Editing by Amran Abocar and Reed Stevenson)

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