Boeing (BA, Financial) 777 is currently the most talked about subject in the aviation industry. The plane maker recently said that it may be required to consider a production cut for the current-generation 777 passenger plane to manage a smooth transition to its reengineered version, the 777X. However, Emirates Airline’s announcement on Tuesday regarding its interest in an order for around 15 777 aircraft offers some sort of support to Boeing to extend the 777 assembly line further and lower the production gap.
Last week at a conference ahead of the Paris Air Show, the jet maker acknowledged that 777 production cut could be required in 2018 as the company switches to construct the reengineered 777X, which is due to enter service in 2020. Earlier Boeing said no production changes would be required to the existing build schedule of 8.3 planes a month, which translates to 100 a year. However, Emirates’ interest could slightly turnaround things in favor of the jet maker.
A ray of hope
In an interview Emirates’ president Tim Clark said that a prospective order is “under the microscope,” though there is no hurry since Boeing has got abundant 777 availability. The Dubai based carrier is at present the largest 777 operator across the globe, operating as many as 144 jets with another 49 current-generation 777 waiting for delivery.
If Boeing actually happens to bag a fresh deal from Emirates, it would give a major boost since the company is working its level best to sustain current 777 production rates before the 777X hits the skies. Emirates was, in fact, the launch customer of the 777X aircraft at the Dubai airshow in 2013. The airline operator has given firm commitment for 150 of these planes with options for 50 more.
At the International Air Transport Association’s annual meeting, Clark said that Emirates is looking to make a deal for 10 to 15 777-200LR. The model is the longest-range airplane in production, which can fly 9,395 nautical miles. This shall support Emirates to serve nonstop routes from Dubai to South America and Oceania. The gulf carrier already flies 10 of this 777 version.
Why the 777 is crucial for Boeing
The 777 is one of Boeing’s key aircraft that makes good profits for the plane maker. Besides the narrow body 737, the 777 is the company’s regular cash generator. So a production cut, (which is closed tracked by investors since it’s tied to the aero major's financial health) would mean that the company’s top line, bottom line, and cash flow shall get impacted.
Boeing found a way to make the 777 more attractive and marketable to customers by increasing seating capacity by 14 to 386. It worked on reducing the weight by 1,200 pounds to improve fuel efficiency by about 5%. These improvements are estimated to be available from 2016.
Boeing’s vice president marketing Randy Tinseth said that the company is lately sensing an uptick in interest for the 777-200LR. However, he denied to name the prospective buyers. He confirmed that the 2015 and 2016 777 slots are already occupied, while 2017 is partially busy with more than 40 current-generation 777 aircraft.
Boeing needs to secure around 40 to 60 new 777 orders annually so that it can sustain the present annual output of 100 planes. So far this year, the company's order books show orders for 25 777s. At this point of time, winning an order from Emirates shall be crucial. This shall help the company in filling empty production slots and stretch the production line until the 777X production picks pace and starts churning numbers. Only time will tell how smoothly the Chicago headquartered company handles the 777 transition. Until then, let’s stay tuned for further updates.
