The Boeing – Airbus $77 Billion Battle Is Lighting Up Dubai

Nov 15, 2017

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

Boeing and Airbus have been fighting over airplane orders for decades, but the rivalry has never been on display as much as it was Wednesday at the Dubai Air Show. On the same morning, Airbus unexpectedly announced its largest order ever and Boeing immediately followed one hour later with a huge deal of its own. Together, the two orders total $77 billion dollars.

Airbus won the day with a monster commitment for 430 A320neo and A321neo single-aisle jets, totaling $49.5 billion at list prices, from the US private equity firm Indigo Partners. By number of airplanes, if not by overall price, it’s the largest order ever in the history of commercial aviation for a single planemaker.

Indigo will distribute the planes among four airlines it either owns or has a stake in. Those are US-based Frontier Airlines, Volaris in Mexico, new Chilean airline JetSMART, and Hungary-based Wizz Air.

That was a good rebound for Airbus from the public-relations defeat Boeing handed the European company on the first day of the show, when Emirates — which had been expected to buy more Airbus A380s — said instead it had bought 40 Boeing 787s.

One hour later, Boeing countered with $27 billion from FlyDubai, the low-cost airline owned like Emirates by the Dubai government, for 225 of the 737MAX family. That might have been less money, but a top Boeing executive, who’s a veteran of the Dubai event, was upbeat when TPG ran into him minutes before the announcement and asked him what the American company’s response was going to be. He replied with what sounded like a barb directed at one of the Airbus customers, JetSMART, which has just begun flying.

One thing to note about both commitments is that they are memorandums of understanding, or MOUs, basically saying that a contract will be signed at a later date. There’s no reason to expect they will not become orders, but at this stage, they are not formally on the books. And, those prices are list prices — far higher than what a customer really pays per unit when buying hundreds of airplanes in one go.

The biggest deal in the history of Airbus may also have been the last hurrah for John Leahy, the sales chief who is a legendary figure in aviation circles and is retiring soon. “It’s one of the last deals I’ll do at Airbus,” he said at a press conference in the Airbus chalet at the air show.

In detail, Wizz Air is buying 146 planes (72 A320neo, 74 A321neo); Frontier 134 (100 A320neo, 34 A321neo); Volaris 80 (46 A320neo, 34 A321neo); and JetSMART 70 (56 A320neo, 14 A321neo.)  Leahy said he expects a final order to be signed by the end of the year. Deliveries will begin in 2021.

Indigo Partners (no relation to Indian airline IndiGo) negotiated the deal as a single order even though it’s meant for four different airlines, said Bill Franke, Indigo Partners’ co-founder and managing partner.

Those four are all low-cost or ultra-low-cost carriers, which is what makes them attractive to investors, Franke said. Growth in commercial aviation will come mostly from areas where “we are getting people off buses and trains and onto airplanes,” Franke said at the Dubai announcement — and that means aircraft that are cheap to operate are key.

The Airbus A320 and a A321Neos are meant to be just that, saving fuel compared to current single-aisle jets by using new engines. “We can reduce cost by 10% compared to today,” Volaris CEO Enrique Beltranena said.

That’s where the real fight between the similarly sized Airbus Neos and the Boeing 737 MAX family is — about who can save airlines the most. Fleet commonality also plays a part, and all of the airlines that signed commitments to buy Neos on Wednesday already operate A320-family jets. And FlyDubai, which bought the MAX, already has Boeing 737s in its fleet.

The FlyDubai order includes three out of the four models that make up the MAX family: the MAX8, 9 and 10, said Kevin McAllister, the CEO of Boeing Commercial Airplanes. It also includes 50 options.

“It’s the biggest order ever for FlyDubai,” Sheikh Ahmed al Maktoum, the CEO of the airline as well as of Emirates, said. “It will help us mantain an efficient fleet.” This is also the largest-ever single-aisle jet order, by number of airplanes and total value, from a Middle East carrier, according to Boeing.

Sheikh Ahmed al Maktoum and Kevin McAllister at the press conference announcing FlyDubai
Sheikh Ahmed al Maktoum and Kevin McAllister at the press conference announcing FlyDubai’s order for the 737MAX. Photo by Alberto Riva / The Points Guy

FlyDubai had its first MAX8 on display at the air show, where TPG editor-at-large Zach Honig had a look at the interiors and checked out the new flat-bed business class seats, a rarity for a single-aisle jet.

Boeing also scored another 787 operator on Wednesday, with Egyptair saying it will lease six 787-9  from AerCap — which, although a leasing company and not an airline, is the biggest 787 customer in the world with 115 owned or ordered. It’s not known yet whether Egyptair will put those new Dreamliners on services to the US, where it currently flies 777s in a decidedly subpar configuration.

US flyers can already get a ride in one of Frontier’s Neos — the airline operates 13 of them on routes across the US from its Denver (DEN) base.

Featured image of the Airbus press conference by Alberto Riva / The Points Guy

 

Chase Sapphire Preferred® Card

WELCOME OFFER: 60,000 Points

TPG'S BONUS VALUATION*: $1,200

CARD HIGHLIGHTS: 2X points on all travel and dining, points transferrable to over a dozen travel partners

*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.

Apply Now
More Things to Know
  • Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®
  • 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 60,000 points are worth $750 toward travel
  • Get unlimited deliveries with a $0 delivery fee and reduced service fees on orders over $12 for a minimum of one year on qualifying food purchases with DashPass, DoorDash's subscription service. Activate by 12/31/21.
  • Earn 5X points on Lyft rides through March 2022. That’s 3X points in addition to the 2X points you already earn on travel.
Intro APR on Purchases
N/A
Regular APR
15.99%-22.99% Variable
Annual Fee
$95
Balance Transfer Fee
Either $5 or 5% of the amount of each transfer, whichever is greater.
Recommended Credit
Excellent/Good

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.