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Photo courtesy of Boeing Co.

A Boeing 787 completes one of a series of flight tests. The company plans to begin delivery of the first Dreamliner planes in the fourth quarter of this year.

United finalizes $2.4B deal for 25 Boeing 787s

by Tara Lachapelle
Feb 25, 2010

Chicago-based aerospace giants, Boeing Co. and UAL Corp., finalized a $2.4 billion order Thursday for 25 of Boeing’s new 787-8 jetliners, the new composite aircraft currently undergoing flight tests.

The contract, which was originally announced in December, could further jumpstart Boeing’s top line, which has been flat over the last three years. But the deal had little impact on the companies’ stocks Thursday: Boeing closed at $62.87, down 0.96 percent, and United closed at $15.66, down 0.06 percent.

“Boeing and United Airlines share an 80-year partnership,” said Jim Albaugh, CEO of Boeing’s commercial airplanes division, in a news release. UAL Corp., parent company of United Airlines whose hub is O’Hare International Airport, was the launch customer for Boeing’s 777 model back in 1995.

United said it plans to retire its older Boeing 747s and 767s operating on international routes around the same time it receives the 787 deliveries.

So far Boeing has orders for 876 Dreamliners and plans to begin delivering them in the fourth quarter of this year. However, Boeing spokesman Jim Condelles said United wouldn’t receive its orders until later in the decade, and United spokeswoman Jean Medina said she expects delivery of its first plane in 2017.

“Overall, Boeing is a great company,” said Nathan Smith, an industry analyst from Frost & Sullivan Inc. “The best thing going for them is that they deliver the airplane on time.”

The new orders could benefit Boeing’s sales, which already increased 12 percent to $68 billion from $61 billion in 2008. But 2009 sales were only a slight improvement from 2007’s $66 billion in revenue.

United, Continental Airlines Inc., and Northwest Airlines, now owned by Delta Air Lines Inc., are the first U.S.-based carriers to place orders for the 787s. AMR Corp., owner of American Airlines, has also placed orders for the Dreamliner series, but Condelles said the order is still awaiting the finalization step, which is contingent upon American’s union dealings with the Allied Pilots Association.

According to Smith, Dreamliner order cancellations from companies such as Australia's Qantas Airways Ltd. and Russia's S7 Airlines crippled the hype over the new plane last quarter. He said Boeing had a total of 910 aircraft orders in December 2008, but only 851 as of December 2009, creating a net loss of 59 aircraft year over year.

“The delays have actually overshadowed a very good airplane,” Smith said. “There were a lot of cancellations and referrals, not so much due to the aircraft’s being delayed, but primarily due to the economy itself.”

Boeing’s fourth 787 flight-test plane successfully completed a three-hour flight Wednesday, departing from Everett, Wash. "Airplane No. 4 operated flawlessly today," Captain Heather Ross, chief pilot for that plane, said after landing.

The 787 boasts a material breakout of 50 percent composite materials, 20 percent more fuel efficiency and fewer emissions, and up to 45 percent more cargo revenue capacity for carriers.

“It’s very unique. It’s going to be an environmentally friendly aircraft that will deliver substantial fuel savings,” Smith said.

“Going forward,” he added, “if Boeing is successful with these test flights, it will definitely see more of these orders coming back, and it will be a profitable airplane for the company itself.”