Boeing wins $37 billion Saudi Arabia deal for new airline

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(Bloomberg) — Saudi Arabia will buy 78 Boeing Co. 787 Dreamliners as Crown Prince Mohammed bin Salman revives the country’s flag carrier and oversees the rise of a new international airline that seeks to rival Emirates and Qatar Airways.

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Boeing said the new airline, called Riyadh Air, would buy 39 787-9 jets with options for 33 more, while existing state-owned carrier Saudia would buy 39 787s and have top-up options for another 10. The jets will be equipped with engines from General Electric Company. The White House put the deal value at around $37 billion, although larger customers usually get steeper discounts.

Riyadh Air, owned by Saudi Arabia’s sovereign wealth fund, was formally announced on Sunday and will be run by former Etihad Aviation Group boss Tony Douglas. The carrier said it aims to connect more than 100 destinations around the world by 2030

The Boeing deal comes after US and Saudi officials worked to improve relations between the two countries, which had soured last year over oil policy. The venture is part of a wider campaign by the Crown Prince to diversify the kingdom’s economy and make it less dependent on oil. Last week, the Saudis agreed to restore diplomatic ties with Iran.

The US administration estimated that the Boeing and GE components of the order mean nearly 1 million US jobs in 44 states across the US supply chain. This would include approximately 150,000 new manufacturing jobs.

Boeing began talking to the Saudis about three years ago, but talks accelerated in May, according to a senior US administration official.

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Officials said two White House aides, US energy envoy Amos Hochstein and Council coordinator for the Middle East Brett McGurk, advocated for commercial deals.

Saudi Arabia’s ambassador to the US, Princess Reema bint Bandar al-Saud, said in a statement that the agreement is the fifth largest commercial order by value in Boeing’s history, calling the purchase “a blueprint for economic and social reform that Opening up Saudi Arabia” to the world.

The agreement is a major step forward in a pledge to form a new airline with Saudia, the flag carrier of Saudi Arabia. The Kingdom has ambitions to turn Riyadh into a powerful business hub and compete with the big airlines for global transfer traffic. Saudia now mainly serves Jeddah and the Haj pilgrimage market.

Part of the plan envisions a growing tourism industry in a that until recently was largely closed to foreign visitors.

Bloomberg News reported in October that the Saudi wealth fund was in talks with Boeing and Airbus SE regarding orders for the new airline.

For Boeing, the order is a significant win in a sector that has been a major source of business for the Airbus-Boeing monopoly over the past two decades.

In Dubai, Emirates flies a wide-body-only fleet built around the Airbus A380 double-decker and Boeing 777. Qatar and Etihad have also made heavy purchases from the two aircraft manufacturers, turning the into a global transit hub and increasingly a must-see destination. For the sun-seeking tourist.

–With assistance from Ryan Bayne and Matthew Martin.

(Update in sixth paragraph with details of the conversation.)

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