Airlines turn to Boeing 777
By JAMES WALLACE Seattle Post-Intelligencer | June 20,2005
LE BOURGET, France The Airbus A380, the biggest passenger jetliner ever made, is unarguably the star of this year's Paris Air Show. Even Boeing commercial boss Alan Mulally had his picture taken next to it.
And the biggest industry buzz at the show is the brewing battle between The Boeing Co.'s 787 and the Airbus A350.
But another airplane is quietly doing much more to change the aviation landscape and rattle the Airbus folks in Toulouse Boeing's 777.
One by one, some of the world's best-known airlines that have been customers of the four-engine Airbus A340 are making deals for Boeing's twin-engine 777. They are falling into the Boeing camp like dominoes, and others could soon topple.
"Quad jets are not really relevant for the long-haul mission any more, " said Richard Aboulafia, senior aviation analyst for the Teal Group, an industry consulting firm. Aboulafia is here watching developments at this week's air show, where Boeing has picked up 38 orders for various 777 models.
Airbus has no orders in Paris for the A340, and none are expected. But its planned twin-engine A350 has won 82 order commitments at the show as of yesterday, as that plane finally begins to gain traction against Boeing's twin-engine 787, which has amassed 266 orders and commitments, though none at the air show.
"When you look at Boeing's sales results, the 777 is right now the lively airplane in the large widebody sector," said Steven Udvar-Hazy, chairman and chief executive of International Lease Finance Corp.
On Tuesday, Udvar-Hazy announced at the air show that ILFC is ordering another eight 777s. That will make 75 that the leasing giant has ordered since the 777 entered service in 1995 with United Airlines.
"It is the preferred airplane, "Udvar-Hazy said, bringing an even bigger smile to the face of Mulally, who was standing next to him.
The ILFC announcement took place inside Boeing's shiny new 777-200LR, which will join the Airbus A340-500 as the world's longest-range jetliner when it enters service early next year. Boeing flew the plane to Paris as part of a 50-day world tour that gets under way immediately after the show.
Before arriving in Paris from Seattle, the 777-200LR stopped in Montreal, Canada, where about 3,000 Air Canada employees toured the plane.
In late April, Air Canada, which had previously rejected Boeing's 777 in favor of Airbus planes, including the A340-500, stunned Airbus by announcing that it was ordering 18 777s along with 14 787s, and was taking options on 46 more 787s.
The 777 order was for a combination of the two newest members of the family, the 777-300ER and the smaller but longer-range 777-200LR. Robert Milton, chairman and chief executive of the Air Canada holding company, said the airline would phase out its long-haul Airbus jets, including the A340-500.
In an interview, Milton explained why he became a convert to the twin-engine 777.
As part of its evaluation of the 777 and the A340, Milton said, Air Canada plugged into the sales equation fuel prices based on oil at more than $100 a barrel.
"When you put that up there, the overwhelming economic outcome of two engines vs. four really came to the fore," Milton said.
Several years ago, Airbus ran an advertising campaign "Four engines for the long haul" for its then new A340-600 and A340-500. The ads suggested that two-engine planes are not as safe as those with four engines when flying long distances over water.
'That's all well and good," Milton said of the Airbus argument. "But you are watching a shift occur and based on what I'm hearing, you will see a move away from four engines to two. Four-engine jets are heavier and twice as many things can go wrong. "
Also this year, Air India chose the 777-300ER and 777-200LR over the A340-600 and A340-500.
Vasudevan Thulasidas, chairman of Air India, said in an interview that the better economics of the twin-engine 777 helped carry the day for Boeing.
The biggest 777 customer is Singapore Airlines. It has some 60 planes in service and 19 777-300ERs on order, with options for another 13. But Singapore also operates a handful of A340-500s on 18-hour non-stop flights from Los Angeles and New York to Singapore.
As part of the upcoming 777-200LR world tour, the plane will stop in Singapore, where Boeing will make a presentation to airline executives.
Chew Choon Seng, chief executive of Singapore Airlines, said he has not decided whether the 777-200LR will become part of Singapore's growing fleet of 777s. But he did say the airline will not exercise options with Airbus for more A340-500s.
Another stop for the 777-200LR on the world tour is Sydney, Australia, where a similar presentation will be made to Qantas. Like Singapore, Qantas will be an early customer for the A380. Unlike Singapore, Qantas does not operate 777s or A340s. It has 747s for its long-haul fleet and in early 2007 will introduce the A380.
Qantas is currently evaluating the 777 and 787 against the A340 and A350. A decision is probably three to four months off, said Geoff Dixon, chief executive of Qantas.
A person who knows Dixon well and is familiar with how the evaluation is going said Qantas "loves" the 777.
Dixon, in the interview, said Qantas will consider the 777-200LR as part of any possible 777 order, but it wants proof the plane will do what Boeing claims fly non-stop from London to Sydney with a full load of passengers.
"Our people at this stage are not confident that the plane can meet the specifications that Boeing indicates," Dixon said.
Emirates is also considering whether to order the 777-200LR. It is a major Airbus customer for the A340-500 and A340-600, and the biggest A380 customer by far. But Emirates also has a fleet of more than 20 777s, and has 30 777-300ERs on order from a leasing company.
Sources said Emirates could announce another big 777 order later this year that will include the 777-200LR. As part of the complex deal that would include a launch order for the A350, Emirates would shed its A340-500s if it orders the 777-200LR, the sources said.
Naresh Goyal, chairman of India's Jet Airways, said in a recent interview that he is talking with Emirates about its A340-500s, but stressed that nothing has been decided. The airline needs long-haul jets quickly to serve international routes recently awarded by the Indian government. It can't wait for new planes on order.
At the air show this week, Jet Airway, which is privately owned, announced an order for six 777-200LRs and four 777-300ERs.
Also ordering those two models at the air show was Doha-based Qatar Airways , an all-Airbus customer until now, and the launch customer for a newer version of the A340-600.
Qatar's order for the 777 also includes the new 777 freighter, which will be based on the 777-200LR design.
Despite the current sales boom for the 777, Udvar-Hazy believes the A340-600 and A340-500 are not finished. But he can't say the same for the older A340-300, which he believes is vulnerable with the development of the A350.
Aboulafia, the Teal Group analyst, agrees. He noted that Airbus plans to also take on the 777-200ER with its A350-900, a bigger version of the A350-800.
"It is clear that the A350 is an ambitious plane that will take over a lot of A340 roles," he said. "The problem for Airbus is that they kicked it up some to go after the 777-200ER. Smart move. But you are also committing fratricide with your A340 prospects. Time will tell. But right now history is strongly leading the industry toward twin engines. "
Even though the A350 will be a long-haul plane and has two engines, John Leahy, the Airbus sales chief, is still pushing the Airbus view that the four-engine A340 is the better and safer choice than the twin-engine 777.
"I know that Boeing has been out there offering to buy A340s (from Emirates, Singapore and others)," Leahy said in a recent interview. "I've never offered to buy 777s. Perhaps Boeing knows the value of these aircraft better than I do. "
He said airlines prefer the reliability for a four-engine plane for very long distances.
"It is one thing to go across the Atlantic on a twin," he said. "But 17-18-19 hours non-stop on a twin? Airlines think twice about that. "
Boeing agrees, sort of: Four engines are better.
At a recent meeting of Boeing's jetliner marketing people in Seattle, someone posted a large sign: "Four engines for the long haul."
Below the sign were photos of two Boeing planes the two-engine 787 and the two-engine 777.