The airplane wars heated up the Dubai Air Show on Wednesday as both Airbus and Boeing Co. (NYSE: BA) announced deals valued at tens of billions of dollars. Top prize goes to Airbus for signing a memorandum of understanding (MOU) with private equity firm Indigo Partners for 430 Airbus passenger jets valued at $49.5 billion at list prices.
Boeing signed a commitment for 175 of its 737 MAX aircraft and purchase rights for another 50 with the UAE’s Flydubai airlines. At list prices the deal is valued at $27 billion. Earlier this week Boeing signed a $15 billion commitment letter with Emirates airlines for 40 Boeing 787 Dreamliners and two additional orders with Azerbaijan Airlines ($1.9 billion) and a Kuwait-based leasing company ($2.2 billion). The week’s total comes to just over $46 billion.
In the hierarchy of orders, an MOU is the least definitive while a commitment represents a stronger tie-up with final details to be worked out. But until the buyers sign a firm order and the planes are added to the company’s order book, the aircraft maker gets no payments.
Flydubai’s commitment for 225 Boeing 737 jets includes more than 50 of the company’s new 737-10. The company is an all-Boeing airline and to date has taken delivery of 63 737-800s and three 737-8s. Flydubai ordered 86 Boeing 737s at the 2013 Dubai Air Show and placed its first order for 50 planes in 2008.
Indigo Partners owns four airlines: Frontier (United States), Wizz (Hungary), JetSMART (Chile) and Volaris (Mexico). All are budget carriers and all the planes covered by the MOU are members of the Airbus A320 single-aisle family. Indigo had previously ordered 427 A320-family planes, so today’s deal doubles the number of Airbus planes in the firm’s fleet. Airbus sales vice-president said the deal is a “detailed” MOU and the contracts will be signed by the end of this year. The engines to be included with the planes have not been selected.
The most anticipated deal of the week hasn’t happened yet. Emirates and Airbus have been discussing a new order for the superjumbo A380. Emirates once said it would order 200 of the massive planes if Airbus would put a new engine on the frame and make other improvements. The company has demurred and a potential deal for this week was believed to include an order for 40 A380s provided Airbus committed to running a production line for the planes for a minimum of 10 years.
The Dubai show closes Thursday, so there’s still a (slim) chance that Airbus and Emirates will agree on a deal for the A380.
Boeing shares traded down about 0.5% in Wednesday’s premarket, at $260.50 in a 52-week range of $144.46 to $267.62. The 12-month consensus price target is $280.09.
Airbus shares traded up about 2.5% in Paris, at €85.61 in a 52-week range of €54.50 to €89.12. The 12-month price target on the stock is €92.07.
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