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Etihad sets stage for $50 billion of jet deals from Gulf

The Boeing logo is seen at their headquarters in Chicago, April 24, 2013. REUTERS/Jim Young
The Boeing logo is seen at their headquarters in Chicago, April 24, 2013. REUTERS/Jim Young

By Praveen Menon and Alwyn Scott

DUBAI/NEW YORK (Reuters) - Etihad Airways is close to placing a order that could kick off a $50 billion jet-buying spree from the Gulf as the region's carriers flex their muscles in an industry hit by weak margins and high fuel prices.

Taking advantage of deep pockets and a geographically strategic position between East and West, Gulf airlines are expanding rapidly and diverting long-haul traffic from airlines in Europe, the United States and parts of Asia.

Abu Dhabi airline Etihad is expected to buy dozens of Boeing jets, including the revamped 777X mini-jumbo and a repeat order for its 787 Dreamliner, sources familiar with the matter said on Monday.

The deal could be worth $18 billion at list prices and comes as Etihad prepares to celebrate the 10th anniversary of its maiden flight on November 12, highlighting the Middle East's emergence as a fast-growing global travel hub.

If confirmed, Etihad's order could pre-empt a widely expected blockbuster deal for 100 or more 777X jets from rival Emirates , which has said it may announce a large order when it hosts the Dubai Airshow next month.

The deals are still under negotiation and could change in size and timing, said the sources, who spoke on condition of anonymity because they are not authorized to speak publicly. Boeing's European rival Airbus is also competing for the business.

Together with an order from Germany's Lufthansa in September, the latest business is likely to ramp up competition between planemakers by allowing Boeing formally to launch the new version of its long-range 777X twin-engine jetliner.

Airbus has punctured Boeing's traditional dominance of the market for big twin-engine jets with its new A350-1000 and scored a historic breakthrough in Japan this month.

DREAMLINER BOOST

Two people familiar with the matter said that Etihad is looking to buy 25 to 30 of the revamped 777X. And in a vote of confidence for Boeing's Dreamliner, which has suffered a series of technical problems, Etihad may also increase its order for the lightweight jet by up to 30 aircraft, one of the sources said.

Etihad, which has 41 Dreamliners on order, declined comment.

Boeing said interest was "high" for the revamped 406-seat 777X but declined to comment on negotiations and has yet to make a formal decision on whether it will build the new aircraft.

Dubai's home carrier Emirates has said it is considering what many in the industry expect to be a huge order for Boeing 777X jets at the November 17-21 Dubai Airshow.

Emirates president Tim Clark was quoted last month as saying that much work needed to be done to finalize commercial terms and that it would not go ahead with any deal until it was ready, but industry sources say that speculation is rife that the deal could be worth as much as $52 billion.

"The much bigger news would be a non-launch (of the 777X in Dubai), or a launch with tepid numbers," said Richard Aboulafia, analyst at Virginia-based Teal Group, referring to expectations of a formal launch of the 777X at the Dubai show.

"Since Boeing has been carefully designing the 777X to meet their (Emirates airline) needs, anything less than a 70-100 aircraft firm order would raise questions. And a non-order would be a disaster for Boeing."

The nearest competitor to the 406-seat Boeing 777X is the 350-seat Airbus A350-1000, the largest member of the newest family being developed by the European company.

Boeing's arch rival was due to provide an update on the carbon-composite jet on Monday.

Qatar Airways, another big Boeing customer with an order of 30 Dreamliners, has expressed interest in the 777X but is viewed as the most cautious of the Gulf's big three.

In other business, budget carrier flydubai, which is fast expanding its routes, is expected to place a $5 billion order for 50 narrowbody jets at the Dubai show and is looking both at Boeing's 737 MAX and the Airbus A320neo.

Saudi Arabian Airways and Kuwait Airways, which put on hold plans to buy 25 new aircraft from Airbus in September, will also look to finalize a deal in Dubai next month.

(Additional reporting by Tim Hepher in Paris and Siva Govindasamy in Singapore; Editing by David Goodman)

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