(Bloomberg) — Saudi Arabia will buy 78 Boeing Co. 787 Dreamliners, as Crown Prince Mohammed Bin Salman revitalizes 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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The new airline, called Riyadh Air, will buy 39 787-9 jets, with options for 33 more, while existing state-owned carrier Saudia will purchase 39 787 and have a top-up option for another 10, Boeing said. The jets will be fitted with General Electric Co. engines. The White House put the deal value at almost $37 billion, though big customers typically receive steep 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 repair ties between the two countries, which hit a low last year over oil policy. The enterprise is part of the crown prince’s broader campaign to diversify the kingdom’s economy and make it less reliant 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 about 1 million US jobs in 44 states across the American supply chain. That would include about 150,000 new manufacturing positions.
Boeing began talking to the Saudis about three years ago but negotiations intensified in May, according to senior official in the US administration.
Two White House aides, US energy envoy Amos Hochstein and Brett McGurk, the National Security Council’s coordinator for the Middle East, advocated for the commercial deals, the officials said.
Saudi Arabia’s ambassador to the US, Princess Reema bint Bandar Al-Saud, said in a statement that the accord constitutes the fifth largest commercial order by value in Boeing’s history, calling the purchase “a blueprint for economic and social reform that is opening Saudi Arabia up to the world.”
The agreement marks a major step in Saudi Arabia’s pledge to create a new airline alongside flag carrier Saudia. The kingdom has ambitions to turn Riyadh into a powerful business hub and compete with larger Gulf airlines for global transfer traffic. Saudia now predominantly serves Jeddah and the Hajj pilgrimage market.
Part of the plan envisions a burgeoning tourism industry in a country that until recently was largely closed off 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 an important victory in a region that has been a major source of business for the Airbus-Boeing duopoly in the last two decades.
In Dubai, Emirates flies a wide-body-only fleet built around the Airbus A380 double-decker and the Boeing 777. Qatar and Etihad have also purchased heavily from the two plane manufacturers, turning the Gulf into a global transfer hub and increasingly a destination for sun-seeking tourists.
–With assistance from Ryan Beene and Matthew Martin.
(Updates with details on talks in sixth paragraph.)
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