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MarketScreener Homepage  >  Equities  >  Nyse  >  Boeing Company (The)    BA

BOEING COMPANY (THE)

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Boeing : Nets Major Order for Its Grounded 737 MAX Jet -- 2nd Update

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11/19/2019 | 03:57pm EST

By Benjamin Katz and Doug Cameron

DUBAI -- Boeing Co. secured deals Tuesday for its grounded 737 MAX, a timely endorsement as the plane maker seeks regulatory approval for returning the aircraft to service.

The MAX deals came at the biennial Dubai Air Show and broke a five-month order drought for the plane, which has been grounded world-wide since its second fatal crash, in March. Kazakhstan's Air Astana agreed to buy 30 MAX jets, and an undisclosed customer signed up for another 20, according to a person familiar with the transaction. Those deals added to the 10 planes bought Monday by Turkey's SunExpress, an existing customer that has yet to receive any of the 32 planes already on order.

"I believe this is momentum. Thus far we're restoring confidence," Stan Deal, Boeing's commercial airplanes chief, said after announcing the Air Astana deal, which is valued at $3.6 billion at list price but before customary discounts. "And three customers voting for the MAX, we'll take it any day. We're very happy with that."

Boeing has also managed to revive a planned sale of wide-body 787 Dreamliners to Dubai's Emirates Airline, the world's biggest operator of long-haul jets, which could be announced this week, according to people familiar with the matter. It also announced the sale of three 787 Dreamliners to Ghana.

The Chicago-based manufacturer still faces challenges. Rival Airbus SE won three-quarters of the 300 orders and commitments announced so far at the show, including a scaled-back deal with Emirates.

The deals come as some industry leaders express concern about faltering growth in global airline traffic.

"Next year will remain tough," said Tim Clark, the president of Emirates, citing a range of global economic pressures including Brexit, the U.S.-China trade war and unrest in Hong Kong. "My view is that by 2021 we will be through it."

Both plane makers had struggled to secure new deals in 2019 as airlines face a multiyear wait for deliveries from backed-up production lines and wrestle with the slowdown in passenger and cargo traffic.

"Orders are coming back, suddenly, and they're mainly going to Airbus," said Richard Aboulafia, an aerospace analyst at Teal Group Corp. "But what matters is airline traffic, and it stinks."

Previous Dubai Air Shows have hosted some of the largest-ever plane orders as airlines like Emirates spent tens of billions of dollars on new jets, only for intensifying competition and global trade concerns to slow traffic growth.

Passenger traffic had been growing an annual rate of 7% over the past five years but has now fallen below 4%, with the Middle East the worst-performing region. That has cut into airline profits and led some carriers to scale back expansion plans.

Boeing and Airbus continue to battle for deals. But analysts view any MAX commitments as particularly critical at a time when Boeing is trying to keep customers from abandoning the jet.

"The order is relatively modest versus a MAX backlog of 4,525 aircraft, but does represent a vote of confidence," said Sheila Kahyaoglu, an analyst at Jefferies.

Boeing has said no orders have been canceled as a direct result of the MAX grounding, but its backlog had shrunk by about 200 planes this year because of airline bankruptcies and carriers swapping into other types, lured by discounts.

The company still expects the plane to be recertified by the end of the year, at least in the U.S., and the absence of negative news in Dubai has helped continue a month-long rally in the stock.

Boeing shares were down about 0.6% in afternoon trading on Tuesday, but are up about 11% over the past month.

Mr. Deal, recently appointed to head Boeing's commercial airplane arm, has led the company's presence at the show, and analysts said it has benefited from so far avoiding any public criticism from customers over the MAX.

The revived deal for 787 Dreamliners relates to an agreement worth $15 billion at list prices for Emirates to buy 40 of the twin-aisle jets, which was announced at the Dubai Air Show in 2017, but lapsed.

Boeing has recently struggled with lackluster demand for the 787, amid a dearth of orders from China, and headwinds generally for the market for big planes. The revived deal could be announced as soon as this week, according to people familiar with the matter, though they said it would likely involve fewer planes, potentially the smaller 787-9 variant.

Separately this week, Emirates placed an order for 50 Airbus A350s, another large jet that competes with the 787. It hasn't yet agreed, though, on a preliminary commitment to buy the European plane maker's A330neo, which also competes with the 787.

Emirates also has an existing order for 150 of Boeing's new 777X, a jetliner that is larger than the 787. Mr. Clark also issued a warning to Boeing saying that the number of 777X jets it takes depends on when the aircraft -- which is more than a year late because of engine issues -- will be available. Emirates could instead place an order for the Airbus A350-1000 to keep to its current fleet plan until the upgraded Boeing plane is ready, he said.

Write to Benjamin Katz at ben.katz@wsj.com and Doug Cameron at doug.cameron@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
AIRBUS SE 0.03% 127.04 Real-time Quote.51.31%
BOEING COMPANY (THE) 2.43% 354.09 Delayed Quote.9.80%
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Financials (USD)
Sales 2019 80 630 M
EBIT 2019 1 986 M
Net income 2019 1 843 M
Debt 2019 17 249 M
Yield 2019 2,25%
P/E ratio 2019 124x
P/E ratio 2020 15,8x
EV / Sales2019 2,69x
EV / Sales2020 1,70x
Capitalization 199 B
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Mean consensus OUTPERFORM
Number of Analysts 24
Average target price 385,95  $
Last Close Price 354,09  $
Spread / Highest target 47,1%
Spread / Average Target 9,00%
Spread / Lowest Target -18,1%
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Managers
NameTitle
Dennis A. Muilenburg President, Chief Executive Officer & Director
David L. Calhoun Non-Executive Chairman
Jenette E. Ramos Senior Vice President-Supply Chain & Operations
Gregory D. Smith CFO, EVP-Corporate Development & Strategy
Gregory L. Hyslop CTO, Senior VP-Engineering, Test & Technology
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AVIC ELECTROMECHANICAL SYSTEMS CO LTD--.--%3 535