May 2005 
Volume 04, Issue 1 
New and Notable

A stunning 12 months

Announcements from Air Canada, Korean Air and Air India cap successful first year for 787 Dreamliner

It's been a wild 12 months for the 787 Dreamliner program at Boeing Commercial Airplanes.

The program, which late last month completed its first year since its April 2004 launch, has attracted unprecedented demand from airlines. Since its first order for 50 airplanes, placed by the Japanese carrier ANA (All Nippon Airways), customers had announced orders and commitments for 237 airplanes.

Aerospace industry observers have acknowledged these achievements. According to a Seattle Post-Intelligencer report, Heidi Wood, an analyst with Morgan Stanley, called the 787 "inarguably the most successful aircraft launch ever" in a research note written to the brokerage's clients.

Among the 787 program's recent headlines:

  • Air Canada and Boeing announced an agreement that includes firm orders for 14 787s, a mix of 787-8s and 787-9s, plus options and purchase rights for an additional 46 airplanes. Air Canada's first 787 will be delivered in 2010. The pact also includes firm orders for 18 777s, plus purchase rights for 18 more, in a yet-to-be-determined mix of the newest 777 models.
  • Boeing and Korean Air Lines Co. announced an order for up to 20 Boeing 787s. The agreement involves 10 firm orders and options for 10 additional 787s.
  • Air India said it intends to purchase 20 787-8 airplanes, with options to buy seven 787-8 Dreamliners at a later date. That's along with 15 airplanes from the 777 family, with options to buy another eight. Boeing said it was "pleased" with Air India's intent. Air India must secure government approval before finalizing the orders.

These agreements follow announcements in 2005 for orders and commitments from Icelandair, Ethiopian Airlines and six leading airlines in China. Through April 26, customers of the 787 had announced orders and commitments for 237 airplanes.

In fact, the program's successful first year means that the airplane's delivery positions are "essentially sold out through 2010," said Alan Mulally, Commercial Airplanes president and CEO.

Air Canada, Korean Air and Air India joined the 787's other customers in citing the airplane's economics as a key factor in making their decisions.

"The 787 will help us realize our goals of being one of the world's top 10 passenger airlines by 2010 and to reduce our costs by 10 percent," said Y.H. Cho, Korean Air chairman and CEO.

"Our analysis of these aircraft pointed to overwhelmingly attractive economics," said Robert Milton, president and CEO of ACE Aviation Holdings Inc., the parent company of Air Canada. "We have estimated the fuel burn and maintenance cost savings alone on the 787 to be approximately 30 percent versus the 767s they will replace."

Industry observers generally agreed the pact with Air Canada represented a bellwether of the 787 program's progress.

"Boeing appears to be making a major technological jump over Airbus," Robert Fay, a financial analyst with Canaccord Capital Corp., told the Canadian newspaper The Globe and Mail.

"There's a tipping-point factor here," said Richard Aboulafia, a Teal Group analyst, in a USA Today report. "It's not just about Air Canada. It's more than that—that it could be a clean sweep" against the Airbus A350, a proposed airplane that's generally viewed as a direct competitor to the 787.

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