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[UPDATE – Boeing has communicated with us that the company has made no decision about 777x assembly and they continue to explore all their options]

With Japan Air Lines breaking Boeing’s lock on the Japanese market with an order for the Airbus A350, the focus is now turning to ANA, which is also looking at replacing its existing 777 fleet.  The two choices in the market are the A350, which enters service in 2015, and the 777-X, which is expected to enter service in 2020.

imagesTraditionally, Japan has been virtually an all-Boeing market for the major carriers, as Japan has had significant portions of Boeing aircraft programs.  Approximately 35% of the 787 is made in Japan, a content just about equal to that made in the US for that program, and Japan has been Boeing’s traditional outsourcing customer for 777 and other programs.  The risk, should ANA order Airbus, is that Boeing could dramatically cut its Japanese content for future programs, risking jobs in an already fragile Japanese economy.

But the countervailing issue is timing.  Had Boeing been on time with 787, the 777X would be flying sooner.  But coming five years after the A350 entry into service, the issue for carriers is whether they can wait while their competitors acquire more fuel efficient aircraft.  In the case of ANA, its major competitor, JAL, has placed its order, and it will need to react to remain competitive in offering new technology aircraft.

Several industry analysts are predicting an Airbus win at ANA, and a potential shift in partners on the 777 from Japan to potentially South Korea or China, each of whom is eager for aerospace business. Our sources indicate that this is now being viewed as a “must win” by Boeing in Seattle, while Airbus is viewing this as a key conquest customer that would be a “strategic victory” that could be leveraged globally.  The stakes are high, and ANA is in the driver’s seat to get a great deal on whichever of the two aircraft they order.

With anticipation of launch orders for more than 300 777X aircraft in the works at the Dubai Airshow from Emirates, Etihad and Qatar, joining the launch order for 34 aircraft from Lufthansa, the 777X will have gain a significant number of orders when formally launched later this year.  But with those orders potentially taking up early delivery slots, will there be room for ANA early enough in the program to dissuade them from A350?

During the 787 battery crisis, Boeing held its briefing in Japan, as the two most impacted customers, ANA and JAL, lost face by ordering a high technology airplane, with significant Japanese content, that was grounded.  We commented at the time that Boeing failed to properly read cultural nuances, and faced continuing issues in Japan.  With the JAL order, the chickens have come home to roost, and were we to bet on the ANA selection, we’d be laying odds on Airbus to win the order, as the cultural imperative is to send a strong message to Boeing.

Boeing’s traditional influence in Japan appears to be waning, and we would expect Japanese participation on the 777X to be lower than for 787.  The all composite wing for the 787 is currently built in Japan, but we expect the 777X wing may come back to the United States.  This would have a significant impact on Japan’s aerospace industry, which is gearing up for the Mitsubishi Regional Jet, Japan’s first commercial aircraft since the YS-11 four decades ago. With that program coming on line, and the strong 787 contracts in place, Japan will need to fill the gap if participation in 777X is reduced from that of the current 777.


We understand from industry sources that, at this stage, it is unlikely that the 777X will be  built in Everett, Washington. Potentially the aircraft would be produced in Charleston, South Carolina, where there is space for a major facility expansion.  While no announcement has been made, we understand that a preliminary decision has been taken, but management will fully play the political game to gain as many additional incentives as possible from state and local governments before announcing their decision.

Should Boeing lose the ANA order, this could significantly impact decisions on outsourcing and component manufacturing locations for Boeing, and may be a positive for Seattle area employment, which will likely lose 777X assembly, but perhaps gain some 777X manufacturing initially planned for Japan.

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