Breakthrough for Boeing - Siberian airline wants 15 Dreamliners; Takes Options on Ten More

Boeing made the first sale of its 787 Dreamliner jet to a carrier in Russia, where airline passenger travel is expected to double by 2015.

S7 Airlines, based in Novosibirsk, Siberia, signed a contract Tuesday for 15 jets with an option for 10 more. Deliveries will start in 2014.

"Today we are making history," Boeing Vice President Marlin Dailey told reporters in Moscow. "We are very proud to be bringing the 787 Dreamliner to Russia."

At list price, the planes would cost $2.4 billion. With the typical discounts, the order is worth an estimated $1.5 billion, according to aircraft-valuation firm Avitas.

S7 and bigger rival Aeroflot are among Russian carriers expanding their fleets to meet surging demand for air travel in an economy in a ninth year of expansion.

Airlines in Russia, a country of 142 million people, carried 38 million passengers last year, 8.3 percent more than in 2005.

Russia's aviation industry manufactured hundreds of aircraft each year during Soviet times. Since the early 1990s, the industry has produced 36 airliners and carriers have imported more than 120 foreign-produced planes.

"This contract marks a positive trend in Russian airlines renewing their fleets," Yelena Sakhnova, a transportation analyst with Deutsche UFG in Moscow said in a phone interview. "The fleet is obsolete and the choice of Western aircraft is the right one since there are no Russian analogs."

Tuesday's order for the long-haul Dreamliner is S7's second for Boeing airplanes in five weeks. Last month, the carrier ordered 10 single-aisle 737-800 models to boost its tourist-charter business.

Deliveries of those planes will start in 2010.

Chicago-based Boeing is treating S7 as a launch customer in Russia and is offering a discount, said Dailey, the company's commercial-airplanes vice president of sales for Europe, Russia and Central Asia. He declined to specify the exact amount.

During a contract-signing ceremony, Dailey presented S7 Chief Executive Vladislav Filyov with a 787 model painted in S7 corporate colors. The airline completed its re-branding program two years ago to end its Soviet-era image.

S7 will take loans from banks to finance the deal, Filyov said, but he declined to provide details. He said negotiations with Boeing were "unprecedentedly tough."

Airbus on March 22 won a pledge from state-controlled Aeroflot to buy 22 A350s worth $4.4 billion, trumping a bid by Boeing.

Airbus offered Russian industry a 5 percent stake in building the aircraft. It has firm orders for 13 A350s.

Boeing is not in talks with any other Russian airlines on the 787, but is holding informational meetings, Dailey said.

He said Boeing is still counting on an order from Aeroflot. "We will do whatever we can do to secure that business," he said.

S7 operates 63 aircraft including A310s, A319s, Boeing 737s, Ilyushin Il-86s and Tupolev Tu-154Ms. S7 is controlled by its top management, which holds a 63 percent stake.

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