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The Struggling Boeing 777 Gets a Big Boost From the Middle East
Adam Levine-Weinberg
Boeing’s goal of selling at least 40 current-generation 777s in 2016 looks much more feasible than it did just one week ago.
While the stock market has surged to record highs in 2016, shares of Boeing (NYSE:BA) have been held down by widespread worries about slowing aircraft demand. Indeed, with the end of September quickly approaching, Boeing is less than halfway to its full-year goal for aircraft orders.
Order activity for the 777 widebody family has been particularly disappointing this year. Moreover, the backlog for this cash cow is disappearing quickly, which makes the task of finding new orders especially pressing. Fortunately, Boeing moved closer to finalizing two important 777 orders last week.
777 sales in focus
Over the next several years, Boeing will transition from the 777 to the next-generation 777X. However, the 777X won’t arrive until 2020, and production of that new model won’t fully ramp up until a couple of years later.
Boeing must sell enough 777s to bridge the gap until 777X production reaches full speed.
However, the fact that the current-generation 777 is about to be supplanted by a new model makes that quite challenging.
In January, Boeing announced plans to cut 777 production from 8.3 per month to seven per month at the beginning of 2017 to cope with the resulting order slowdown.
To continue at that rate through the model transition, Boeing has said that it needs to garner 40-50 777 orders per year for the next few years. Increasingly, many analysts think that Boeing will have to slash 777 production even further. The reason? Boeing has logged just eight net orders for the 777 so far in 2016. Thus, Boeing desperately needs to finalize more orders in the next few months.
New order from Saudi Arabia
Last Friday, Saudi Arabian Airlines — also known as Saudia — announced plans to acquire 63 new aircraft: 28 widebodies from Boeing and 35 narrowbodies from Airbus. The Boeing order includes 15 777-300ERs, as well as 13 787 Dreamliners.
Saudia already operates more than four dozen 777s, including 24 777-300ERs. The new planes for this important Boeing customer will most likely be used for a combination of growth plus replacement of aging 747 jumbo jets.
Boeing hasn’t officially announced the Saudia deal yet. However, it doesn’t face any major obstacles to wrapping up this vital order.
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