DUBAI (TheStreet) -- Boeing's (BA) 225 orders from three state-owned airlines for its new 777X aircraft are being widely applauded in some quarters, but the orders raise questions about the viability of the customers' strategies and the impact on U.S. and European airlines.
At the Dubai Air Show, Boeing announced 259 orders and commitments for the 777X, its latest technological miracle, with deliveries expected to begin in 2020. The customers include Emirates, 150 aircraft; Qatar Airways, 50 aircraft; and Etihad Airways, 25 aircraft. A fourth 777 customer, Lufthansa, previously ordered 34 aircraft.
The three Middle Eastern carriers have hubs within a few hundred miles of one another, all doing the same thing, which is to connect passengers in hubs that have almost no local traffic. It is a model that failed in the U.S. airline industry, which gave up on redundant hubs to instead operate a small handful of profitable hubs.
Moreover, experts said, Boeing's orders represent a zero sum game because many of the passengers who fly on the new aircraft will come from European airlines who are current Boeing customers. Those carriers, theoretically, will now order fewer new planes.
"There are two issues with the order," said Richard Aboulafia, aerospace analyst for Teal Group. "One is it's other people's traffic. The other is it's three guys with the same idea."
The orders "are great news -- it's good to see new products launched -- but they are not additive," said Aboulafia, who is attending the Dubai Air Show. "Most of them will come from other people's jets."
Boeing spokesman Tim Neale said that with continuing strong traffic growth in Asia and the Middle East, "there is a real demand out there for air travel and air shipments that can benefit all airlines -- So I don't agree that this is a zero sum game." Also, in a position paper, Emirates maintained that while it is state-owned it receives no state subsidies or funding, and in fact pays dividends to the Dubai government.