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Boeing Ropes in Japanese Partners for 777X

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Commercial aerospace giant The Boeing Company (BA - Free Report) extended its five-decade long Japanese relationship by roping in five partners from the country to help build its iconic 777X aircraft. The most advanced fuel efficient airplane of its class, the 777X has already started to generate keen interest among airline operators across the globe.

Components from Japan

To produce this fuel efficient airplane Boeing will outsource the manufacturing of different components to other companies. In fact, the company has already partnered with General Electric Company (GE - Free Report) for the engines.

The latest agreement with Japanese partners will help Boeing to secure nearly 21% of the structural components for the 777X. The components coming from Japan will include fuselage sections; center wing sections; pressure bulkheads; main landing gear wells; passenger, cargo and main landing gear doors; wing components and wing-body fairings.

The 777 Reincarnation

777X – the upgraded version of the 777 – was launched at the Dubai Air Show last year. The company received commitments for 259 airplanes from four customers. To date, Boeing has been able to secure orders for 66 777X. At present Boeing is developing two variants of the 777, namely, 777-8X and 777-9X, the prices of which are pegged at $349.8 million and $377.2 million respectively.  Boeing claims that these models will consume 12% less fuel and its operating cost will be 10% lower than its peers.

Production of this airplane is scheduled to start from 2017 and delivery expected to begin from 2020. Boeing is developing this version on the already proven technology of its 777 and 787 Dreamliner.

Quality of Japanese Products

Historically, Boeing has relied on Japanese aerospace companies for the structural parts of its airplanes.  With the 777X model Boeing is following the same tradition. The high quality of Japanese products prompts Boeing to return to Japan whenever it has a new plane on its drawing board.

In 2013, Boeing spent more than $4 billion on goods and services from Japan.

To Sum Up

We believe the 777X airplane will eat into the market share of Airbus A-350. However, Boeing will need to deliver these airplanes on time while its performance has to match the promised levels.

Boeing is presently securing the components of this iconic airplane. Boeing’s management must have learnt its lesson from the 787 Dreamliner production delays and needs to be wary of such pitfalls.

Having said that Boeing will require to keep a keen watch on archrival Airbus, as the jets developed by Canada’s Bombardier Inc. or Brazil’s Embraer S.A. (ERJ - Free Report) are at best inconsequential. We believe Airbus will definitely try to develop something new to curb the expected dominance of Boeing 777X in the long haul airplane space.

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