Tuesday, December 13, 2011

Boeing Logs Biggest Order Ever, Yet Again

Boesing (BA) announced today its first firm order for the new 737 MAX fuel-efficient, narrowbody plane, from Southwest Airlines (LUV). BA claims this is the largest order ever which apparently passes a few other recent orders that I thought had the same claims.

This industry appears ripe with orders, but deliveries remain a different story.

LUV ordered 208 narrowbody planes for $19B (list price not actual price). This includes an order for 150 MAX aircraft that won't even start deliveries until 2017 (or '18 or '19 if the historical delay pattern continues).

BA is reporting commitments for 948 MAX planes that could climb to 1,500 by the end of next year.

This truly has to be the most interesting industry where customers order hundreds of planes at a time for delivery in 5-10 years. Makes me wonder if the industry won't eventually face stiff competition from a Brazil, China, or Russia made model that is able to make planes in a more timely manner.

Until then airplane leasing companies like AerCap Holdings (AER) and Fly Leasing (FLY) will continue to provide a very valuable service. Access to new planes without having to fund the purchase. FLY just announced as well that it sold 2 planes for more than book value continuing to show how undervalued these stocks trade.


Details on order via BA PR:

  • Southwest Airlines today announced a firm order for 150 fuel-efficient 737 MAX airplanes. Southwest is the first customer to finalize an order for the 737 MAX and becomes the launch customer for the new-engine variant. The Dallas -based carrier also ordered 58 Next-Generation 737s.
  • The firm order is the largest in Boeing history both in dollar value, nearly $19 billion at list prices, and the number of airplanes.
  • 737 MAX is the new-engine variant of the world's best-selling airplane and builds on the strengths of today's Next-Generation 737. The new-engine variant, powered by CFM International LEAP-1B engines, reduces fuel burn and CO2 emissions by an additional 10-12 percent over today's most fuel-efficient single-aisle airplane.
  • 737 MAX has orders and commitments for more than 900 airplanes from 13 customers, while the Next-Generation 737 family has won orders for more than 6,600 airplanes and Boeing has delivered more than 3,800.


Details from a Reuters report:

  • Boeing reported commitments for 948 MAX airplanes and said the figure could climb to 1,500 by the end of next year.
  • The traditional discount carrier has a fleet of 699 planes, including 88 Boeing 717s acquired when it bought AirTran this year. (apparently even this huge order for 5-10 years still only replaces a small portion of its fleet)
  • Boeing on Tuesday also announced inaugural list prices for its 737 MAX aircraft. The 737 MAX 8 will sell for a catalogue price of $95.2 million, Boeing said on its website, while the larger 737 MAX 9 will sell for $101.7 million.
  • He said Boeing would likely garner more orders for its 737 MAX from existing customers, and noted the company was currently competing with chief rival Airbus (Paris:EAD.PA) for an order from United Continental Holdings (NYSE:UAL), the world's largest carrier.


Back on the largest order ever issue:

American Airlines (AMR) order was not all firm so it was surpassed by this LUV order. Per my article [AMR Takes a Flyer By Ordering Historical Amount of Planes] back in July, AMR plans to acquire 200 planes from the 737 family with an option for 100 more. It mentions that starting in 2017, AMR will become the first airline to take delivery of "next generation" planes so apparently LUV jumped in line or the AMR bankruptcy changed plans.

  • Under the agreement with Boeing, American plans to acquire a total of 200 additional aircraft from the 737 family, with options for another 100 737 family aircraft. American has the flexibility to convert the new deliveries into variants within the 737 family, including the 737-700, 737-800 and 737-900ER.

Private Indonesian carrier Lion Air placed an order for 230 planes, including 201 of the MAX, but those orders weren't firm either.


Disclosure: Long AER. Please review the disclaimer page for more details. 


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