Boeing (BA, Financial) shares trended up 1.90% to $137.19 on Oct. 7 when Ethiopian Airlines CEO Tewolde GebreMariam divulged the airline’s intention of placing orders for the highly awaited wide-body plane, the 777X. The 777X is a re-engineered version of Boeing 777 and is scheduled to enter service at the end of this decade. Ethiopian Airlines is on an expansion mode, and the latest order is a positive sign reflecting the strength in demand for the 777X. Here’s a look at the reported order and why it’s going to be a special win for Boeing.
The order
Ethiopian Airlines is expected to place orders for 15 to 20 Boeing 777Xs by the end of this year. According to Wall Street Journal, the East African airline’s reported order consideration is worth around $7.4 billion at catalog price. What makes this order special is that the carrier first deliberated on purchasing Airbus' (EADSY, Financial) A350-1000 planes but had a change of mind to go with Boeing 777X. The airline CEO said the 777X’s structure and performance would suit its operations better at its high-altitude hub in Addis Ababa.
Ethiopian’s regional director of the Americas, Nigusu Worku Wordofa, said, "It's good to have different types of aircraft. It gives us flexibility. (However) Boeing and Ethiopian have been in business for seven decades; we have a very bright future and will continue buying Boeing airplanes."
Boeing’s win over Airbus
The airline already has an orders placed for the A350 and was again making a consideration before it decided to move to the 777X. Ethiopian is scheduled to take delivery of its first A350 next year. The A350 shall "play an important role in our fast, profitable and sustainable growth strategy," said GebreMariam to The Reporter newspaper in 2014. However, range and performance is where the 777X beats its French counterpart.
The Airbus A350 is a built-from-scratch model and has been developed to compete with Boeing’s 787 Dreamliner and 777X. The 777X is expected to be more fuel saving than the A350 and fly 350 to 400 passengers. In addition, the 777X is a bigger jet compared with the A350. Also, as far as the A350-1000 version is concerned, it has been stretched to accommodate passengers to capacity. The 777X model was introduced at the 2013 Dubai Air Show and was quick to receive 259 commitments from four carriers. Boeing presently has 306 unfilled orders for the jet. Ethiopian Airline’s inclination towards the 777X establishes the superiority of the aircraft over other competing planes.
Growth plan
The order is part of Ethiopian’s expansion plan to increase the size of its fleet to around 150 planes within a decade. It presently operates 76 aircraft, which includes 59 Boeing airplanes, 10 of which are cargo jets. The rest are Bombardier Q400s that ply on domestic and regional routes.
Ethiopian Airlines is Africa's largest carrier. It has set a steady growth plan, particularly across North America. It is actively working to make an allowance for a flight between its Addis Ababa hub and the New York area, according to Wordofa. The decision is expected to come by the end of this year. The new Boeing planes shall substitute 10 older 777 twin-engine jets and steer the airline towards attaining desired goals. For Boeing, the deal reiterates the 777X’s strong demand even in a comparatively dull market.
