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Analysis: Qatar Airways Strikes Boeing Deal

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Analysis: Qatar Airways Strikes Boeing Deal

Analysis: Qatar Airways Strikes Boeing Deal
October 10
08:16 2016

MIAMI — Last week, Qatar Airways placed a massive order for up to 100 Boeing airplanes, buying 30 787-9 Dreamliners, 10 777-300ERs, and signing a letter of intent for 60 737 MAX airplanes. While this is undoubtedly a huge win for Boeing, some of the bolder proclamations seen over the weekend about this being a blow for the 737 MAX, or about Boeing’s superiority (from the mouth of Qatar Airways GCEO Mr. Akbar Al Baker himself) are assuredly overblown.

Al Baker is as entertainingly bombastic as ever


The headline with any Qatar Airways order from either original equipment manufacturer (OEM) is always the commentary from Qatar Airways’ overwrought CEO, and this order was no different. As always, Al Baker used the press as a bully pulpit to send a message, and this time his target was Airbus.
The backdrop here is definitely that Al Baker has a point about Airbus failing to deliver on promises for initial delivery. This has become an all-too common habit since the A380 was launched at the beginning, and there is something to be said for keeping those manufacturers on their toes, and holding them accountable for their promises.

But his comment that “Boeing makes the best airplanes,” is nothing but hot air. Both Airbus and Boeing make excellent products (though to hear Al Baker speak at times, both  OEMs consistently output junk), and depending on the market segment, different planes from either manufacturer have superiority in the context of real-world market need.

So fundamentally, this is another case of Al Baker trying to negotiate through the press. The problem is that at this point, almost everyone is on to his routine. If Boeing is late with the 777X delivery, Al Baker will suddenly discover that the A350-1000 is the greatest thing since sliced bread. His commentary surrounding this order is more of the same — bark over bite.

On an unrelated note, the claim that Qatar Airways enjoyed a higher dispatch reliability with 787s and 777s than its A350s that has been making the rounds is also highly misleading. It might well be true that Qatar’s A350’s have lower dispatch reliability than its 787s and 777s at this moment of time. But anyone without Boeing-tinted goggles on would recognize that this is an entirely normal position for a new aircraft to be in.

By all accounts, the A350 is progressing very nicely in its expansion of service, and it is ahead of where the 787 was at the same point in its life cycle in terms of dispatch reliability.

The 787-9s are a nice get for Boeing, but it’s not a shock that Qatar Airways is buying more Dreamliners. The 787-8 has been a hit for Qatar Airways in opening long and thin routes, and as we have seen with airlines ranging from Air New Zealand to Air Canada, the 787-9 has many of the same capabilities in making new routes feasible.

737 MAX news is overblown


At first glance, the though of Qatar Airways flip-flopping from the A320neo to the 737 MAX would appear to be huge news. The 737 MAX is at this point losing both the real battle in terms of orders, and the perception battle because of the high profile airlines that have switched from the 737 NG to the A320neo.

In truth, that trend is overblown, and undoubtedly if Qatar Airways had placed a firm order for 60 737 MAX 8s to fly from its Doha hub, that would be massive news.

Unfortunately this isn’t quite a firm order, and as with any LOI there is a lot that could go wrong between now and when the order is completed. Even if Qatar Airways does take the planes, it could well park them with newly minted quasi-subsidiary Meridiana. The Italian carrier, of which Qatar Airways owns 49%, is a struggling leisure airline based in Italy and Qatar’s move would be rather unprecedented given that rival Etihad has eschewed direct orders for subsidiaries despite making several equity investments of its own.

30 firm MAX orders plus 30 options might make a degree of sense for Meridiana’s future fleet needs, as centralizing on a two-type fleet (737 MAX and 767) would simplify the carrier’s operating structure.

There were some renderings made of the 737 MAX in Qatar Airways colors, but that once again falls in the category of Al Baker sticking it to Airbus through the press. Functionally, despite the cancellation of four A320neo orders, Qatar Airways appears to be sticking with the A320neo as planned. Our view is that it is very likely (85%) that you will see the A320neo in substantial numbers in Qatar’s fleet and reasonably unlikely (35%) that you will see the 737 MAX in any numbers in Qatar’s fleet.

The Boeing 777-300ER order is a win for Boeing but doesn’t come close to closing production gap


Ten 777-300ERs is a non-trivial figure by almost every metric. At list prices that is worth more than $3.2 billion (more than $1.5 billion applying standard discounts inflated a bit by Boeing’s current situations), and it is bigger than the entire 777-300ER fleet of 16 different airlines.

The one thing it isn’t big enough to do is change the trajectory of Boeing’s production gap in any meaningful way, as the airframer still needs to sell more than 100 airplanes to bridge production to the December 2019 entry into service (EIS) of the re-engined 777X.

With that as the backdrop, this is a nice order for Boeing, but in closing less than 10% of the overall production gap, it isn’t a home run.

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About Author

Vinay Bhaskara

Vinay Bhaskara

Senior Business Analyst, Big Airline Enthusiast, Avid Airport Connoisseur, Frequent Flyer, Globetrotter. I Miss Northwest Airlines Every Day. vinay@airwaysmag.com @TheABVinay

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8 Comments

  1. JS
    JS October 10, 11:47

    He behaves like a child of Donald Trump and a real housewife.
    I completely disagree with him saying Boeing makes the best planes. I like 777 but has he ever sat in his 787 economy seats? They are painful to say the least. A350 and A380 are obvious winners in terms of passenger comfort – especially, when you are flying long haul. I am sure they are economic too when used on the correct routes.
    As much as I like QR and would fly with them, it is sad that its CEO talks like this.

  2. dave the buck the canoeing canuck
    dave the buck the canoeing canuck October 10, 13:34

    Sounds like sour grapes… You are undoubtedly an Airbus lover and a Boeing hater…

  3. JS
    JS October 10, 17:26

    I am actually not a Boeing hater – I love flying the 777. I like both Airbus and Boeing equally.
    He might be a smart guy, but the way he acts and behaves for an airline CEO is just immature – as if he lives in a high school drama. You will never see Tim Clark or Alan Joyce or Willie Walsh talk like this.
    And, its just my opinion that in current times, for passengers – A350 and A380 are way superior to B777 or B787 or A330 for that matter . By saying that, I don’t hate Boeing.

  4. Matteo Tonelli
    Matteo Tonelli October 11, 12:50

    I have personally never flown on the 787 or A350, but from what I have heard the A350 is dominant in the comfort compared to the 787. The 777 is amazing, it’s the very best aircraft that Boeing had pushed through it’s factory doors, and we can obviously see that. I prefer Airbus but I do love Boeing, both companies are great, although I am dubious about any finalization for the 737 MAX aircraft, if anything only part of the number the LOI states will actually become firm.

  5. steve
    steve October 11, 13:26

    A great order for Boeing and it has the possibility of selling more 737MAX frames which means less for Airbus. I hope the MAX has an on time EIS as some past planes were years late.
    Its the airlines that determine seat width and pitch, not the OEM’s. To use that type of reasoning is not based on real world operations.

  6. Codyrain Slade
    Codyrain Slade October 11, 15:52

    In fact the width of the 787 is greater than the a350! Check it out yourself. Stop beating up on this great American company guys. Please!

  7. frank lu
    frank lu October 12, 12:18

    lets be real now most major airlines flies boeing airplane these boeing 777W or 777L for long haul

  8. TheRestlessAviator
    TheRestlessAviator November 02, 08:29

    The nonsense about the “extra wide body” 350 is horsecrap. The 787 is actually wider than the 350.

    Cabin comfort is entirely determined by the cabin configuration & seat choices made by individual airlines and has nothing to do with which aircraft is better.

    While each airline makes informed choices on how the cabin looks and feels, the driving factor in any airplane order is the performance & efficiency of a particular airplane product. The 787 is leaps and bounds ahead of the 350 programme with better fuel efficiency, dispatch reliability & engine performance, allowing the airplane to fly faster, higher & cheaper for any operator. The only dampener is the long line of wait for a product while can highly influence decisions for any airline.

    My two cents!

    Peace!

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