$19 Billion Boeing, Qatar Airways Deal Is Bad News for Airbus

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In a joint press announcement Friday in Washington, D.C., Boeing Co. (NYSE: BA) and Qatar Airways, the state-owned airline of Qatar, said that the airline has placed an order for 30 Boeing 787-9 Dreamliners and 10 777-300ERs that carry a list price value of $11.7 billion. Qatar Airways also has signed a letter of intent to purchase 60 Boeing 737 MAX 8s with a total list price value of $6.9 billion.

Qatar Airways currently flies 30 787s and 54 777s, with another six 777F freighters and 60 777X passenger jets on order. The announced order adds 40 wide-body jets to Qatar Airways firm order backlog of 65, raising the total to 105.

By far the most interesting part of the announcement of the letter of intent to purchase 60 737 MAX 8s. As we noted in our preview Thursday, the airline has no 737s in its existing fleet.

This could be a very big deal for Boeing’s 737 MAX or it could just be adding pressure on Airbus to deliver the 32 Airbus A320neos that the airline has ordered. So far the airline has cancelled delivery of its first three A320neos. Qatar Airways has refused to take delivery until a performance issue with the Pratt & Whitney engines is resolved. Airbus has said a fix is expected by the end of this year or early next year.

Now, though, Qatar Airways has signed a letter of intent to buy more than twice as many 737 MAX8s as it has remaining orders for A320neos. That has got to be satisfying to Boeing officials. Commercial airplanes president and CEO Ray Conner said:

We are so very proud that a discerning and market-leading customer like Qatar Airways not only continues to endorse our current products, but  also has confidence in Boeing’s new technology that will soon be evident on the 777X and 737 MAX. Our partnership with Qatar Airways has grown and strengthened tremendously over the years and I look forward to the time when its fleet will feature an increasing number of both our single and twin-aisle airplanes.

Qatar Airways CEO Akbar Al Baker said:

Qatar Airways, already one of the fastest growing airlines in the history of aviation, today announces a significant and historic aircraft order that will power our future growth for the years and the decades ahead. Boeing has proven to be a valuable partner, and today’s announcement is testament to our appreciation of the quality of their product and their dedication to providing world class customer service.

And he could have added, “two things that Airbus has forgotten how to provide.” Ouch.

The 10 777-300ERs bring net orders for that plane to 26 for the year, still short of the 40 or so orders Boeing needs to keep its production line working at current rates until the 777X goes into production in 2019. Together with the 30 Dreamliners, Boeing’s order total for the year has now reached 420, still well short of 2015’s pace that resulted in 768 net new orders last year.

At the end of the third quarter, Boeing had delivered 563 commercial jets for the year, including 188 in the third quarter. If it delivers the same number of in the fourth quarter, the total for 2016 will be 11 short of last year’s total 762.

At the end of the third quarter of 2015, Boeing had delivered 580 commercial planes. The difference includes five fewer 747s, seven fewer 737s, four fewer 777s and four fewer 767s. Deliveries of the 787 are up by three for the first nine months of 2016.

Because the news on the wide-body orders was expected and the news related to the 737 MAX 8s is a letter of intent and not a firm order, investors have been cool to the stock on Friday. Shares traded down about 1.3% before the announcement and gained more than half of that back after the announcement.

Late in the noon hour, the stock traded down about 0.7% to $133.50, in a 52-week range of $102.10 to $150.59. The consensus 12-month price target on the stock is $148.94.