A Qatar Airways Boeing 787 lands during the Farnborough International Airshow in England in 2012. (AP Photo/Lefteris Pitarakis)

A Qatar Airways Boeing 787 lands during the Farnborough International Airshow in England in 2012. (AP Photo/Lefteris Pitarakis)

Big Qatar order for 787s, 777s sends a message to Airbus

The Boeing Co. won a major order from Qatar Airways that buoys its 777 production rate in Everett. It also scored an important victory in its battle with the rival Airbus Group in the single-aisle market.

The Persian Gulf carrier ordered 30 787-9s and 10 777-300ERs, a deal worth $11.7 billion at list prices. Actual sales prices are typically negotiated down for significant discounts. It also said it plans to order 60 737 MAX 8s, a move prompted by its frustration with delivery delays on Airbus’ A320neo program.

The order, which was announced at a press conference Friday, is a boost for Boeing, which — along with Airbus — has seen orders slow this year in part due to economic uncertainty in Europe and Asia. Boeing and Airbus have huge order backlogs, meaning airlines likely will have to wait several years to take delivery of an airplane ordered today. Long wait times and low fuel prices now have led some airlines to hold off on placing new orders.

Boeing has only had 6 net orders for its 777 classic models this year. Company executives have said they plan to lower production from 8.3 airplanes a month to to 5.5 by 2018. And they have indicated production could slow even more, which could mean layoffs at Boeing’s Everett plant. The 777 is being phased out in favor of its successor, the 777X, which will be assembled in Everett.

Qatar’s order for 10 777s helps, but Boeing needs to sell more 777 classics to keep production up during the transition to the 777X. Boeing CEO Dennis Muilenburg said last month that the outcome of several 777 sales campaigns could determine whether the company cuts production.

Boeing also is considering whether to boost Dreamliner production from the 12 airplanes a month rate to 14 a month. Sales for the marquee carbon-fiber jet have slowed in recent years, even as production has sped up. Qatar’s 787 order is the biggest since Etihad Airways ordered 30 787-10s in November 2013.

Qatar’s letter of intent to order 737 MAXs underscores the company’s frustration with Airbus’ A320neo program. The airline ordered 50 of Airbus’ revamped single-aisle aircraft — 34 A320neos and 16 A321neos — in 2011. However, delays in the program prompted Qatar to cancel three A320neo orders in protest — one in June and two in August.

The delays stem from problems with the aircraft’s geared turbofan engine, which is supplied by United Technologies Corp.’s Pratt & Whitney unit. The holdups left the airline with “no alternative” but to order the “reliable” Boeing narrow-body planes, said Akbar Al Baker, the Doha-based airline’s chief executive.

However, Qatar still plans to take delivery of the A32oneos and A321neos it has on order, he said. “We never renege on contracts that we sign.”

A letter of intent is not a contract and typically does not require a down payment from an airline.

“It’s an announcement that an announcement is likely coming,” said George Hamlin, an industry analyst and publisher of Airline Monitor.

A customer can back out of a letter of intent, but it would make doing business with Boeing awkward, he said. “There would be some embarrassment from cancelling it.”

Regardless, Al Baker is “sending a message to Airbus — big time,” Hamlin said.

If Qatar did switch its single-aisle order from the A320neo family to the 737 MAX, it would not be the first time that delays on an airplane program allowed a competitor to grab market share. Airbus’ A330 received renewed interest from airlines when Boeing’s 787 program became mired in development delays.

Airbus is also behind on delivering its A350, which competes with Boeing’s 777 and 787, to Qatar and other customers.

Boeing’s deal with Qatar Airways was forged after the U.S. approved sales by Boeing and Lockheed Martin Corp. to Persian Gulf allies, including as many as 72 Boeing F-15 jets to Qatar. The fighter-jet sale is subject to approval by the U.S. Congress.

Material from Bloomberg was used in this report.

Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com; Twitter: @dcatchpole.

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