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Japan Aircraft Industries Consortium Signs 777X Production Agreements with Boeing

Paul, Weiss clients Japan Aircraft Development Corporation (JADC) and a consortium of five Japanese suppliers comprising Japan Aircraft Industries (JAI) signed definitive "life of the program" agreements with Boeing relating to the production of Boeing's next commercial airplane, the 777X. JADC is a non-profit corporation representing the JAI consortium in matters relating to the development of commercial airplanes. The five JAI companies (Mitsubishi Heavy Industries, Ltd., Kawasaki Heavy Industries, Ltd., Fuji Heavy Industries Ltd., ShinMaywa Industries, Ltd. and NIPPI Corporation) will provide approximately 21 percent of the major structural components for the 777X, including fuselage sections, center wing sections, pressure bulkhead, main landing gear wells, passenger, cargo and main landing gear doors, wing components and wing-body fairings. 

The 777X will compete with the Airbus A350 and has been dubbed by Boeing as "the largest and most efficient twin-engine commercial jet in the world, with the lowest operating cost per seat of any commercial airplane." The design configuration for the 777-9X, which will seat 400 passengers and have a peak range of 8,200 nautical miles, and the smaller but longer-range 777-8X, which will seat 350 passengers and have a maximum range of 9,300 nautical miles, is expected to be finalized later this year. Both 777X models will have large carbon-fiber composite wings with a span of approximately 235 feet and "swingtips" that will fold when on the ground, as well as various features of Boeing's existing 777 family and the 787 Dreamliner. Production of the 777X is scheduled to begin in 2017, with the first 777X expected to come off the production line in 2018 and the first customer delivery targeted for 2020. The current list price (before customary industry discounts) for the 777-9X is $400 million and Boeing has announced firm orders so far for 306 777X airplanes from six customers, including All Nippon Airways, Cathay Pacific, Lufthansa and three Gulf carriers.

Boeing's relationship with the Japanese aerospace manufacturers began nearly 50 years ago with work on the 747 airplane. The JAI workshare subsequently increased with work on Boeing's 737, 757, 767 and 777 models and currently also includes approximately 35 percent of the 787 structure, including the 787's wings that are manufactured in Nagoya and then transported with the other JAI components, by air, for final assembly at Boeing's facilities in Everett, Washington and Charleston, South Carolina. The wings for the 777X will instead be manufactured by Boeing in a new $1 billion wing plant that is under construction adjacent to Boeing's primary aircraft assembly plant in Everett, and the JAI companies also are investing in new facilities in Japan that will introduce robotic and other automated systems. With monthly production already increasing for the 787 and the anticipated start of 777X production, Boeing expects to purchase approximately $36 billion of goods and services in Japan between 2014 and 2020.

The firm's relationship with JADC and the JAI companies dates back more than 25 years, as we also represented both in connection with the negotiation of life of the program contracts for Boeing's 777 and 787 airplane programs that were signed in 1991 and 2005, respectively. Our work on a detailed Memorandum of Agreement (MOA) for the 777X program began in October 2013. The MOA negotiations were completed in March 2014 and, after the MOA was signed three months later, negotiations for the definitive 777X agreements took place almost entirely in face-to-face meetings held primarily in Everett and at the JADC and Boeing offices in Tokyo.  

The Paul, Weiss team included corporate partner Marc Perlmutter.

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