After strategic 787 wins, Boeing jet battle shifts to factory floor - Yahoo Finance

By Valerie Insinna and Tim Hepher

(Reuters) - A major purchase by Saudi Arabia caps sales of almost 200 Dreamliners over the past four months, handing Boeing Co major industrial and political wins in lucrative widebody sales against European rival Airbus.

Now the U.S. aerospace giant will face the difficult task of producing and delivering those 787s in a time of unprecedented supply chain pressures, analysts said.

On Tuesday, Boeing announced orders for 78 Dreamliners, split between state-owned Saudi Arabian Airlines (Saudia) and new national airline Riyadh Air.

The $37 billion sale, which Boeing called its fifth-largest commercial order by value, followed a deal with United Airlines in December for 100 Dreamliners and a purchase by Air India that included 20 787s.

Those orders fill out Boeing’s backlog at a time when the company aims to boost production to 10 a month by 2026 – a target that would take “supersonic” growth given that Boeing is still working to increase production back to three a month, said Vertical Research analyst Robert Stallard.

“We've seen the orders are there to back up those rate ramps but ... it's not an issue of demand, it's going to be an issue of supply,” Stallard said. “They've got to go out and actually make the aircraft.”

The 787 faces multiple strains on its supply chain, several of which are shared broadly across the aviation industry, such as forgings and castings for engines. Planemakers are also grappling with the after-effects of the pandemic, which forced waves of layoffs and retirements of skilled workers.

However, the Dreamliner line has dealt with several unique challenges, including a year-long delivery pause due to production quality problems that were resolved last August.

In February, Boeing's chief financial officer, Brian West, said the planemaker had to lower 787 production from three aircraft a month due to slower fuselage production at Spirit Aerosystems. The company also confirmed last month that it would need to replace a noncompliant component before delivering certain 787s.

While Airbus outsold Boeing in the Air India deal, landing orders for 40 A350 widebodys, the U.S. planemaker swept both the United Airlines and Saudi orders.

The Saudi deal in particular was seen as a blow for Airbus which just months ago had been expected to land part of the order. Negotiations ebbed back and forth over the past year, echoing a volatile period in U.S.-Saudi relations.

In October sources said Airbus may win an order for 40 of its A350 jets after Washington said it was reviewing options for Saudi relations in a dispute over oil output levels.

Since then, diplomats and regional experts have said the United States and Saudi Arabia are trying to move beyond last year's low point in ties, as security concerns align over the threat from Iranian drones.

Both Washington and Paris weighed in with lobbying, with Riyadh’s final decision taken at the highest level, according to two people familiar with the negotiations.

One European source called the outcome of the plane order "totally political," but a U.S. official denied there had been any diplomatic trade-offs.

“Saudi Airlines is a government-owned airline, and so there are politics involved with this,” analyst Stallard said. "I wouldn't rule out buying from Airbus if the Saudi government ... thinks its in their best interest to do some things with the Europeans in the future.”

(Reporting by Valerie Insinna in Washington and Tim Hepher in Paris; Editing by Matthew Lewis)

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