Industryweek 12104 Boeing Max 1

Boeing Wins $18.6 Billion Deal as Qatar Buys First 737 Max

Oct. 7, 2016
Qatar Airways made good on a threat to buy Boeing’s 737 Max after rejecting initial A320neo deliveries from Airbus Group SE because of engine issues. 

Boeing Co. landed an $18.6 billion deal with Qatar Airways, one of the largest commercial aircraft transactions of the year, providing a sales boost to the U.S. planemaker’s upgraded 737 jetliner.

The Doha-based carrier made good on a threat to buy Boeing’s 737 Max after rejecting initial A320neo deliveries from Airbus Group SE because of engine issues. Qatar Airways is also taking 777 and 787 Dreamliner aircraft in an order flurry that could add 100 Boeing planes to its fleet, Akbar Al Baker, the airline’s chief executive officer, and Ray Conner, CEO of Boeing’s commercial airplane division, said on Oct. 7 in Washington.

The deal is a vote of confidence in Boeing’s revamped 737 Max, which was announced after Airbus unveiled its upgraded A320neo family and has struggled to close the sales gap. Qatar Airways pledged to buy as many as 60 Max 8 models, valued at $6.9 billion at list prices, marking the carrier’s first narrow-body order from Boeing since 1979.

The order is a boost to Chicago-based Boeing, which, like Airbus, has been contending with sales slowed by economic uncertainty in Europe and Asia and a commodities downturn in Russia and Brazil. Meanwhile, relatively low fuel prices have damped demand for new, fuel-efficient wide-body jets such as the 777 and 787 and contributed to a glut of second-hand models.

Airbus Doubts

Qatar Airways intends to follow through on a 2011 order for 50 Airbus A320neo and A321neo planes, which have a combined value of $6.4 billion at list prices, Al Baker said. But he also took a swipe over issues with the aircraft’s geared turbofan engine, which is made by United Technologies Corp.’s Pratt & Whitney unit, saying the delays left him with “no alternative” but to order the “reliable” Boeing narrow-body planes.

“We never renege on contracts that we sign,” Al Baker said. “The aircraft that we are ordering today will serve this ever-expanding network.”

Qatar is also ordering 30 of Boeing’s 787-9 model and 10 777-300ER jets, valued at a combined $11.7 billion at list prices before discounts that are customary for large aircraft purchases It is Boeing’s largest twin-aisle sale this year, providing a little more visibility into plans for the 777, the planemaker’s largest twin-engine aircraft, as well as for the Dreamliner, the company’s marquee carbon-fiber jet.

Boeing CEO Dennis Muilenburg said last month that current sales campaigns could determine whether Boeing boosts Dreamliner output -- and whether a dearth of orders will force it again to slow assembly of current-generation 777 models before an upgraded version debuts in 2020.

Delivery Delays

Al Baker has signaled his growing frustration with Airbus in recent months, threatening to switch a Qatar Airways order for planes in the A320neo family to Boeing 737 Max jets. He has declined to take delivery of the first Airbus narrow-bodies because of an engine cooling issue.

Airbus has also drawn Al Baker’s ire for its struggles to meet delivery deadlines of the A350, the European company’s most advanced jetliner, which competes with the 777 and 787 Dreamliner. The state-owned airline was the first buyer of the new Airbus wide-body.

Boeing’s deal with Qatar Airways was forged after the U.S. approved sales by Boeing and Lockheed Martin Corp. to Persian Gulf allies, including as many as 72 Boeing F-15 jets to Qatar. The fighter-jet sale is subject to approval by the U.S. Congress.

By Julie Johnsson, Andrea Rothman and Alan Levin

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