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Boeing lands $6 billion deal for 50 of its new 7E7 jets

By David Bowermaster
Seattle Times aerospace reporter

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The deal, which was approved by All Nippon's board today in Tokyo, prompted Boeing's board to officially declare the 7E7 Boeing's next new airplane.

"Our Commercial Airplanes team has done a magnificent job bringing (the 7E7) to market," said Boeing Chairman Harry Stonecipher. "Launch of the 7E7 clearly demonstrates our commitment to innovation and leadership in commercial aviation."

"The size and speed of this order validates our view of the market and demonstrates the tremendous demand for the performance and value provided by the 7E7," said Alan Mulally, president and CEO of Boeing Commercial Airplanes.

All Nippon's order is the largest ever for the launch of a new Boeing jet.

The deal's value is based on Boeing's targeted 7E7 list price of around $120 million. But deep discounts are common on large orders, and launch customers usually receive especially attractive financial terms.

All Nippon will receive a mix of both the short-range 7E7, dubbed the 7E7-3, and the long-range variant, to be called the 7E7-8. The number of each type is not yet known.

All Nippon will use the 7E7-3 on heavily traveled domestic routes while the 7E7-8 will be used on international routes, such as Tokyo to the West Coast of the U.S.

All Nippon is the second-largest airline in Japan and a longtime Boeing customer, having received its first 727 in April 1964.

The transaction culminates months of strenuous negotiations between Boeing and All Nippon and gives the 7E7 a critical vote of confidence as Boeing seeks more customers in Asia, Europe and the Mideast.

Singapore Airlines, Emirates and aircraft lessors International Lease Finance and GE Capital Aviation Services are reportedly considering becoming 7E7 customers as well.
 
Boeing said today it has extended firm offers to more than a dozen airlines.

All Nippon has ordered 274 Boeing jets to date and has taken delivery of 203 planes, according to Boeing's Web site.

All Nippon was Boeing's largest customer in 2003, ordering 45 737s worth more than $2 billion at list prices.

Significantly, more than one-quarter of All Nippon's orders have been for the wide-body 767, which the 7E7 is expected to replace.

The 7E7 will seat 200 to 250 passengers in a three-class configuration of first, business and economy-class seats. The first deliveries are expected in 2008.

Boeing has promised the 7E7 will burn 20 percent less fuel than today's similarly-sized aircraft, most notably the A330-200 built by Airbus, Boeing's European rival.

Boeing believes the world's airlines will order 2,500 to 3,000 jets in the 7E7's size category over the next 20 years, as they open new point-to-point routes and decrease their dependence on large aircraft such as the 747 connecting passengers between major hub airports.

Airbus, by contrast, is developing the 555-seat A380 because it believes a dearth of capacity at major airports will force airlines to fly bigger and bigger jets. The A380 is expected to enter service in 2006.

All Nippon has taken delivery of 77 Boeing 767s to date and has orders pending for nine more. That makes All Nippon the largest customer of 767s outside the U.S.

It was not immediately clear whether All Nippon will convert its pending 767 orders to 7E7s.

The decision could have major repercussions for Boeing's 767 production line in Everett. Boeing only has 24 unfilled orders for 767s in its backlog, including the nine for All Nippon and seven for Japan Airlines, Japan's largest airline and another prospective 7E7 customer.

Boeing said last year it decided to develop the short-range variant in part to meet the needs of Japanese airlines, which see a large proportion of their revenues from domestic flights and from Asian routes.

The 7E7 program passed its first big hurdle in December, when Boeing's board authorized the Renton-based commercial-airplanes unit to begin offering formal contracts to customers.

But Stonecipher had said the plane would not be formally launched until customers were in place.

Information from Reuters is included in this report. David Bowermaster: 206-464-2724 or dbowermaster@seattletimes.com

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