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ANALYSIS

Gulf airline giants prepare for 777X offering

Dubai, May 6, 2013

By Praveen Menon

As they prepare to buy Boeing's new 777X jet, Gulf airline giants Emirates and Qatar Airways are warning that Boeing must avoid the mistakes of the 787 Dreamliner, which cost customers millions of dollars when its batteries failed.

These fast-growing Gulf carriers are expected to be among the first and possibly biggest customers for Boeing's latest offering, which was presented to customers last week.

"For sure they have changed, I hope they have," Emirates' president Tim Clark said, when asked whether the Dreamliner crisis has changed Boeing's approach and thinking.

"Boeing came out of the ashes of the Sonic Cruiser years ago and came up with the Dreamliner, which was a leap of faith by any stretch. They were just beginning to stabilize when things went wrong again," said Clark.

Emirates is not a customer of the Dreamliner but is the largest 777 operator with up to 175 jets that will need replacing soon.

Boeing announced it had begun selling an upgraded aircraft family code-named 777X, launching a race against Airbus for sales of long-haul jets.

Boeing, which has just emerged from the Dreamliner crisis, will now have to convince customers who have lost millions due to the grounding of the 787s.

Qatar Airways, which grounded all its five Dreamliner aircraft, would receive compensation from Boeing, its chief executive Akbar al Baker said.

"Everyone takes risks but Boeing took a very big risk because they went from ground zero to 100 in one leap instead of going in stages," Qatar Airways' outspoken chief Baker told Reuters on board its first 787 flight from Dubai to Doha last week, after the battery fix was installed.

Apart from Qatar Airways, fast-growing Gulf airline Etihad Airways has 41 Dreamliners on order.

"We put together a permanent and comprehensive fix for the issue and we are confident of the 787 safety," Boeing's Middle East President Jeff Johnson said when asked about assurances to its Gulf customers.

US regulators formally lifted flight restrictions on the 787 last month and allowed the redesigned lithium-ion battery system to be installed in airlines.

Ethiopian Airlines became the first carrier last month to resume flying the revamped Dreamliner followed by All Nippon Airways and Qatar Airways.

Eight airlines currently own Dreamliners including United Airlines, ANA, JAL, Air India, Latam Airlines Group and LOT Polish Airlines.

Under questioning from aviation authorities last month, Boeing said it would more rigorously challenge its test assumptions in the future, and that its analysis of the problem could change as more facts become known.

"Things will not be so easy for them in the U.S. now. Boeing has to learn from that too as a lot of the 787 was self-certified," said Emirates' Clark.

Clark said the plane maker has a lot to learn from the Dreamliner crisis. "Perhaps Boeing was not quite ready for it all (the 787). But the crisis helped them learn a lot about design, metallurgy."

The UScompany may also rethink its overseas manufacturing. "They placed their faith in supplies from overseas manufacturers and expected them to be as good as they wanted. That is something they will be less inclined to do now," said Clark.

The industry is learning from the Dreamliner experience and is also pushing harder on areas such as aircraft propulsion, engine technology, batteries and others.

"Like in every new product there will be continuous improvement," said Baker.

"Boeing has a permanent solution now but as new processes are developed, so will new batteries. It may not be the lithium-ion batteries later, it may be something else. I'm sure Boeing will look for improvements in the batteries."

Boeing is now offering a new 400-seat version of the 777, known as 777-9X, and also a 777-8X which would have the longest range of more than 9,300 nautical miles, people briefed about the talks said on Friday.

Both Emirates and Qatar Airways have spoken to Boeing about these offerings. Presentations were made to the management of both carriers.

Baker has said that he is very keen on the 8X and 9X versions of the plane while Emirates' Clark has said specifications of the new plane suits its requirements. Clark has hinted at plans to replace its fleet of 175 Boeing 777s with the 777X.

However, despite the interest, airlines are also concerned whether the problems with the Dreamliner may result in Boeing's other programs being pushed back.

"The cash outflow must be quite difficult to manage," said Clark.

"The cash exposure is a tricky one and they are also trying to get the other programs out of the door."

"An aircraft that they thought could cost $6 to $10 billion is now more than $20 billion."

The halt to Dreamliner flights has cost Boeing an estimated $600 million and forced it to halt deliveries.-Reuters




Tags: Airline | Gulf | 777X |

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