The Paris Air Show opened Monday morning with both Boeing Co. (NYSE: BA) and arch-rival Airbus announcing, among other things, new orders and commitments for more than 300 new commercial jets. As always, the devil is in the details.
First, Airbus announced a firm order for 100 A320neos, the aircraft maker’s single-aisle competitor to Boeing’s 737 MAX family, from GE Capital Aviation Services (GECAS), a division of General Electric Co. (NYSE: GE). GECAS has now ordered 220 A320neos. At a list price of $106.2 for the A320neo, the order is valued at $10.62 billion.
For its part, Boeing said it has taken orders and commitments for more than 240 of the newest plane in its 737 MAX family, the 737 MAX 10, aka the 737-10. Monday morning announcements totaled about 160 new airplanes, but firm orders are scarce.
China’s CDB Aviation Leasing Finance signed a memorandum of understanding (MOU) for 42 737 MAX 8s, 10 737 MAX 10s and eight 787-9 Dreamliners. At list prices, the total value of the deal is $7.4 billion, according to Boeing, and CDB will be one of Boeing’s launch customers for the 737-10. An MOU, however, remains far from a firm order. CDB is converting six existing orders for MAX 8s to the new MAX 10s.
Boeing has not added the 737-10 to its price list yet, but a MAX 8 has a list price of $112.4 million and a 787-9 carries a list price of $270.4 million. However, another China-based firm, BOC Aviation, has signed an MOU for 10 737 MAX 10s in a deal valued at about $1.25 billion, according to Boeing. That would indicate a list price of around $125 million for the MAX 10.
GECAS has ordered 20 of the 737-10s, but the order is a conversion of existing orders for the MAX airplanes. These are not new orders and do not add to Boeing’s order book.
Germany-based tourism business TUI Group is converting 18 of 70 existing orders for other MAX planes to the new 737 MAX 10. Again, this adds nothing new to Boeing’s backlog.
Tibet Financial Leasing signed an MOU for 20 MAX airplanes, in an unspecified combination of MAX 8s and MAX 10s. The deal is valued at about $2.5 billion, according to Boeing.
India’s SpiceJet also signed an MOU to convert 20 existing orders for the MAX 8 to orders for the MAX 10 and added 10 new orders for the MAX 10 for a total of 40 for the new plane.
Boeing receives no payments until MOUs and other commitments are converted into firm orders.
On Sunday, Airbus unveiled a “development study” for an advanced version of its superjumbo A380 that the company calls the “A380plus.” Airbus has been under pressure for the past few years from its biggest customer for the A380, Emirates, to improve the giant airplane. But recent restrictions on flights from the Middle East to the United States have hit Emirates and other Middle Eastern carriers hard and demand for a boost from an average of 497 seats on the current version of the A380 to 575 on the A380plus could be waning.
Emirates wanted Airbus to put new engines on the A380, but Sunday’s announcement from Airbus did not include new engines, opting instead for new winglets and more seats to reduce the cost per seat by about 13% and fuel burn by 4%.
Airbus is expected to announce a production cut to less than one plane per month for the A380 beginning in 2019. Production will fall to one per month next year. Boeing has already announced a production cut to just one 747 every two months.
Boeing stock traded up about 1.3% in Monday’s premarket session to $198.95, which would be a new 52-week high if it holds. The stock’s current 52-week range is $122.35 to $197.95, and the high was set last Friday. The consensus 12-month price target is $189.75.