Why This Airline CEO Just Bought 200 Boeing 737 MAX Planes—Despite Recent Issues
So much for the 737 MAX hangover.
After a quiet Day 1 at the Paris Air Show, Boeing announced a trio of deals Wednesday that stunned the aviation sector. The aircraft manufacturer has new orders lined up from airline customers on three continents for its widebody 787 Dreamliner and its beleaguered narrowbody 737 MAX.
The deal haul carries a potential value of $31.8 billion if you go by list prices. (There are always discounts). Analysts had been voicing concern about the poor early showing for Boeing at the biennial show, the most prestigious in the industry, chalking up the slow deal flow to the woes of its workhorse model, the 737 MAX. On the eve of the show, CEO Dennis Muilenburg told the press Boeing had no timetable for the 737 MAX to take to the skies again. The global fleet of roughly 400 has been grounded since the fatal March crash of Ethiopian Airlines Flight 302.
The announcement of yesterday’s deal with International Airlines Group couldn’t have come at a more opportune moment. IAG, the sixth largest airline group in the world with carriers such as Aer Lingus, British Airways, Iberia and Vueling, signed a letter of intent to buy 200 737 MAX planes, carrying a list price of $24 billion. Boeing shares skyrocketed more than 5 percent on Tuesday.
At a press conference, IAG CEO Willie Walsh, shrugged off the plane’s uncertain future. “We’re partnering with the Boeing brand,” he said. “That’s the brand that I’m doing business with. That’s the brand that I’ve worked with for years. And it’s a brand that I trust.”
Sitting beside him, Kevin McAllister, CEO of Boeing Commercial Airplanes, looked as if he wanted to hug Walsh. “We can’t thank you enough for the confidence you place in the 737 MAX family, and in all of us,” he replied, beaming.
Industry observers point out that it’s a fairly safe hedge for IAG as deliveries aren’t planned until 2023 and 2027, which should give Boeing plenty of time to work through the flight trials and inspections regulators around the world are demanding. Boeing also announced separate deals with Korean Air and Air Lease Corporation on the delivery of 787 Dreamliners worth a combined $7.8 billion at list price.
Boeing rival Airbus stole the show on Day 1 when it said Air Lease Corp. had ordered 27 of its new longer-range, narrow-body model, the A321XLR. While the price tag was less of an eye-catcher, that deal may be the most significant commercial aviation news of the Paris Air Show. There’s huge global demand for narrow-body, long-range aircrafts like A321XLR. The new Airbus model has a range of 4,700 nautical miles with 30% less fuel-burn per seat, an important industry metric.
This morning, Airbus added Australia’s Qantas to its customer list for the new long-distance aircraft. Qantas and Airbus announced a deal for 10 new A321XLR models, part of a 36-plane deal. Airbus’s shares took a nice jump on Monday as news came in from Le Bourget air field, north of Paris. The stock was down this morning.
Analysts, meanwhile, are still hoping to hear more about Boeing’s answer to the A321XLR.
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