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Exclusive: Etihad Airways in talks to cancel, defer Boeing 777X orders - sources

Reuters  |  DUBAI/ABU DHABI 

By Alexander and Stanley Carvalho

DUBAI/(Reuters) - is exploring options with to cancel or defer orders for 777X jets worth billions of dollars in a fresh sign of the carrier's financial strains and potentially squeezing Boeing's newest model, four sources familiar with the matter said.

Etihad, owned by Abu Dhabi, has been reviewing its fleet plans as part of a strategy overhaul launched after a nearly $2 billion loss in 2016.

The airline's management believes it no longer needs all of the 25 777X twin-engined jets and may be willing to incur penalties for cancellations rather than be saddled with future recurring losses stemming from overcapacity, the sources said.

Etihad and declined to comment.

Etihad is a launch customer of the 777X: an upgrade to Boeing's successful mini-jumbo series that includes plans for the world's largest twin-engined jetliner, the 406-seat 777-9 which is due to enter service in 2020.

Cancelling or deferring orders for jets earmarked for production at such an early stage of the ambitious new programme could create a headache for as it switches to the new model.

Although twinjets like the 777X have prevailed over larger and less-efficient four-engined aircraft like the and Boeing 747, analysts say demand for such aircraft remains relatively thin due to cost and size. The 777-9 version has a list price of $426 million.

SHRINKING BUSINESS

Finding alternative airlines to fill Etihad's production slots in time for the launch phase may not be easy, they say, though Boeing has said it is confident in demand for the 777X and that development of the plane is on schedule.

Rivals and are also launch customers of the 777X, whose features include a sleek new wing with folding wingtips to allow it to fit in parking stands.

Other buyers include Cathay Pacific, Lufthansa, Japan's ANA has also expressed interest.

Few details of the fleet review have been made public but Etihad's new said in April it aimed to develop in "a sustainable way".

The has been shrinking its business, including cutting routes and retiring some aircraft without replacements.

reported in May that planemakers were preparing for possible changes to dozens of plane orders from Etihad as it pressed ahead with its review.

It remains unclear to what extent suppliers will be willing to accommodate such requests, with the Gulf making up a significant portion of wide-body jet demand.

Etihad has outstanding orders worth tens of billions of dollars for over 160 and Boeing aircraft, including the new 777Xs.

The bulk of the aircraft were ordered when Etihad was pursuing an aggressive expansion strategy to keep pace with and

Etihad said then that under the agreements with and Boeing it could transfer orders to airlines it had invested in.

But the investment strategy seemingly collapsed last year when minority-owned Air and filed for insolvency. Etihad currently holds stakes in four other airlines, half as many as it once held.

(Additional reporting by in Paris; Writing by Alexander Cornwell; Editing by Edmund Blair)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, June 13 2018. 22:31 IST
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