Business

Abu Dhabi Airline Makes History's Biggest Jet Buy

posted: 14 July 2008 03:06 pm ET

: The bulk of Etihad Airways' huge Boeing buy involves 787s, of which the Abu Dhabi airline could end up receiving 70 as a result of its July 14, 2008 joint Boeing-Airbus purchase. Together, the deals could represent the largest airliner buy in history and be worth nearly $50 billion. Credit: Etihad Airways
: Etihad Airways' commitment to buy up to 20 additional A380s to add to the four it already has on order provides a ringing endorsement of the Airbus superjumbo. The deal also moves firm orders for the A380 past the 200 mark. Credit: Etihad Airways
: Etihad Airways has joined several other airlines who have ordered both the Airbus A350 XWB and its rival, the Boeing 787 family. Etihad has ordered up to 50 A350 XWBs and up to 70 787s. Credit: Airbus S.A.S. 2006/Computer rendering by Fixion-HCSGM
: Etihad Airways has ordered up to another 25 Boeing 777-300ERs to add to five already in its fleet. The Abu Dhabi airline has said it is highly satisfied with the performance of the 777-300ER on its long-haul route network. Credit: Etihad Airways

Abu Dhabi-based Etihad Airways has announced a commitment for up to 95 Boeing widebody jets and up to 110 Airbus aircraft in what is being billed as the largest airliner purchase in history in terms of its potential cost.

Etihad used the occasion of the first day of the 2008 Farnborough Air Show to announce firm orders for 45 Boeing aircraft — 35 787-9s and 10 777-300ERs — and 55 Airbus jets. The Airbus deal involves both widebody and narrowbody jetliners: 10 A380 superjumbos, 25 A350 XWBs, and 20 Airbus A320s.

The airline is believed to have specified some or all of the aircraft in its A350 XWB buy to be of the A350-1000 version, the largest planned member of the A350 XWB family and an aircraft that would be similar in size and capacity to the Boeing 777-300ER. Airbus has sized other A350 XWB family members, which perhaps also could feature among Etihad's deliveries, to rival members of Boeing's 787 family. Etihad joins a list of several airlines that have ordered both the 787 and its Airbus rival, the A350 XWB.

List-price value for Etihad's Airbus order is believed to be nearly $13 billion, and for the Boeing buy more than US $9 billion. But even though the huge size of its Airbus and Boeing orders mean Etihad Airways is likely to have negotiated substantial discounts to the aircraft's list prices, the total value of its order is expected to rise to far above $22 billion — and possibly double that amount.

This is because the Abu Dhabi airline has also optioned 25 more Boeing 787s and 10 more Boeing 777-300ERs and has agreed purchase rights for an additional 10 Boeing 787s and five Boeing 777s. If Etihad Airways takes up all its options and purchase rights, it will receive 70 Boeing 787s and 25 777-300ERs.

Similarly, Etihad has taken options on five more A380s, 10 A350 XWBs and five A320s. Additionally, the airline has acquired purchase rights for five further A380s, 15 A350 XWBs and 15 A320s. If it converts all of these commitments into firm orders, Etihad Airways will take delivery of a total of 20 A380s, 50 A350 XWBs and 40 narrowbody A320s.

Options are an “add-on” to firm orders, Etihad explained in a statement. They are either turned into full orders or cancelled. Options provide the flexibility to take delivery of aircraft at an agreed price and at an agreed time in the future. Purchase rights provide further flexibility, over and above options, to take delivery of further aircraft at an agreed price. With purchase rights, the future price is fixed but the delivery date is not necessarily so.

Deliveries of the Boeing jets from Etihad's latest order will begin in 2011 and will be completed in 2020. The airline already has five 777-300ERs in service. Etihad didn’t indicate when deliveries of its newly ordered Airbus aircraft would begin, but Airbus noted that the Abu Dhabi airline already has 30 Airbus passenger jets in service, 17 more still to be delivered from previous orders and two A300-600 freighters in operation.

Abu Dhabi's growth

“This is a momentous day for Etihad Airways and Abu Dhabi. It reflects the strength and pace of economic growth in the Emirate and the integral role Etihad will play in Abu Dhabi’s future," said James Hogan, CEO of Etihad Airways.

“That future will see planned investments in infrastructure and projects within the Emirate likely to exceed US $200 billion during the next 10 years, an aggressive tourism push and enormous residential development," said Hogan.

“The size of our order also mirrors the rising prominence of the Middle East and its increasing emergence as a new focal point of global aviation,” said the Etihad CEO. "The Gulf is also a natural air bridge between East and West, offering the fastest air links for travellers and freight forwarders."

“The story of Etihad’s growth has been a remarkable one," added Dr Sheikh Ahmed bin Saif Al Nahyan, Etihad Airways’ chairman. "At every stage of our short history we have surprised people with the scale of our ambition — and at every stage we have delivered on that ambition."

Etihad claims to be fastest-growing airline ever

Etihad Airways says that, since it was established in 2003, it has been recognized as the fastest-growing airline in commercial aviation history. At present it serves 45 destinations in Africa, Asia, Australia, Europe, the Middle East and North America (New York JFK and Toronto), and this year is on course to transport 6 million passengers.

The airline placed its first-ever order for aircraft just four years ago, also at the Farnborough Air Show. That deal was a $7 billion order for 24 Airbus widebody jets, including four A380s. Its first Boeing order for five 777-300ERs followed in September 2004. Then, in a $2.2 billion deal announced at the Paris Air Show in June 2007, Etihad ordered another 12 Airbus widebody jets.

At present Etihad Airways has 38 aircraft in service: 32 Airbus aircraft (including six A320-family narrowbodies), five 777-300ERs , and a leased McDonnell Douglas/Boeing MD-11 freighter.

The airline's rapid expansion has continued in 2008. Etihad began service to Beijing earlier this year, and in August it will add Chennai (Madras) and Kozhikode (Calicut) in India, and Minsk in Belarus to its network. Etihad also will launch new services to Moscow in Russia and Almaty in Kazakhstan in December.

Endorsements of A380 and 787

Etihad's huge orders represent ringing endorsements of both the A380 superjumbo and the 787 Dreamliner.

Both jets have experienced widely publicized and embarrassing production delays that forced the manufacturers of the respective aircraft to inform launch customers that initial deliveries of their aircraft would be (in the case of the A380) two years late and (in the 787's case) at least 18 months late. At one point, industry insiders thought Etihad was considering canceling its earlier order for four A380s as a result of the extensive delays to the program.

Etihad Airways' growth is being paced by development at its home airport, Abu Dhabi International Airport. After Dubai, it is currently the second largest airport in the United Arab Emirates, serving 6.9 million passengers in 2007 — 30 per cent more than the year before.

However, Abu Dhabi International is due to get much bigger. Work is underway on a new terminal, which is due to open later this year. Once completed, the airport’s three terminals will have an approximate total capacity of 12 million passengers per year.

The Abu Dhabi authorities expect passenger numbers will reach this level in 2011, so development work has begun on a major new passenger terminal, to be situated between the airport's two runways and known currently as the Midfield Terminal.

Upon completion in 2012, the Midfield Terminal will take the airport’s passenger capacity to more than 20 million per year.