In a move to grow its international business, Northwest Airlines is buying 18 Boeing 787 "Dreamliner" jets and has options to buy 50 more in the future.
They carry a list price of about $120 million each. Neither Northwest nor Boeing would reveal the actual selling prices of the planes. But they'll probably cost the Eagan-based airline $90 million to $100 million each, estimates Richard Aboulafia, an analyst with the Teal Group, an aerospace- and defense-consulting firm.
Boeing has been on a roll with the 787, its new fuel-efficient, long-range twin-engine jet built out of composite materials. Twenty airlines have announced orders for 255 of the planes.
Northwest is in line to be the first North American carrier to put the 787 into service.
Its 787s will have a nonstop range of up to 8,500 nautical miles and carry 36 passengers in business class and 185 in coach.
"This is an investment in our future," said Northwest CEO Doug Steenland.
The planes primarily will be deployed on Northwest's Pacific routes, providing additional service and replacing 747-200s as they're retired. From the Twin Cities or Detroit, Northwest could fly the 787s nonstop to Shanghai or Hong Kong.
While the airline has been losing billions of dollars in the past few years and it's pressing employees for $1.1 billion in wage and other labor-cost cuts, it also must improve its fleet to compete, Steenland said.
"The world does not sit still," he said. "We have to invest for the long term and this is a step to make sure that when we get to the end of this decade, we will have a fleet that puts us on a competitive footing, particularly with foreign airlines, which are buying this plane in significant numbers."
The 787 will be 50 percent more fuel efficient per trip than Northwest's current fleet of 747-200s and DC-10-30s and will have lower maintenance costs, Boeing says.
"This is a brand-new plane, designed from scratch," said Steenland. "The use of composites (in the plane) gives it a range that you previously had only with planes that are significantly bigger."
Production of the 787 will begin next year. Northwest will take delivery of six planes each year during 2008, 2009 and 2010.
"That plane has fantastic momentum," analyst J.B. Groh of investment firm D.A. Davidson said of the 787. "It's a revolutionary new design." The 787 will allow Northwest to have greater flight frequencies on international routes, he said.
If a carrier has the choice of flying one 400-seat plane or two 200-seat planes on a long international route, the two planes would usually be the preferred option, Groh said.
Northwest's deal for the 787 is further evidence that Boeing's European rival Airbus is in trouble, said the Teal Group's Aboulafia.
"This is a major endorsement of the Boeing approach,'' he said. "They (Northwest) are the biggest U.S. A330 user." The A330 is made by Airbus.
"This sends a strong signal that the A350 (the Airbus answer to the 787) might not be competitive," Aboulafia said.
But how can struggling airlines buy planes?
Well, Airbus and Boeing will offer deals, including financing, to keep their factories going. "You get favorable financing,'' said Aboulafia. "And you spread the cost over many years."