Aerospace & Defense

Boeing Sends a Wake-Up Call to Airbus

Boeing AerCap 737 M8
Source: The Boeing Co.
Bright and early Tuesday morning, Boeing Co. (NYSE: BA) woke up the Paris Air Show crowd with an order from aircraft leasing firm AerCap Holdings N.V. (NYSE: AER) for 100 of the company’s new 737 MAX 8s. At current list prices the order is worth $10.7 billion.

AerCap took over negotiations with Boeing on the purchase of the 737 MAXs from International Lease Finance Corp. (ILFC) when it acquired the U.S.-based leasing firm from American International Group Inc. (NYSE: AIG) last year for about $5.4 billion in cash and stock. Abu Dhabi-based Waha Capital owns a 14.1% stake in the Netherlands-based AerCap. Before the ILFC acquisition, Waha Capital owned a 26.3% stake in AerCap. The leasing firm owns about 1,800 aircraft and operates in more than 90 countries.

Boeing also announced Tuesday morning that it had taken an order for 10 more 737 MAX 8s from SMBC Aviation Capital, another aircraft leasing firm. The Dublin, Ireland-based firm specializes in single-aisle, narrow-body planes like the 737 and the A320 from Boeing rival Airbus. The company is privately held by Sumitomo and three of its subsidiaries. SMBC had an existing order for 80 of the planes.

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The third Boeing announcement revealed that Indonesian carrier Sriwijaya Air had ordered two of Boeing’s 737-900ER jets that have previously appeared as being sold to an unidentified customer on the aircraft maker’s order book. This is not, strictly speaking, a new order, although Sriwijaya Air also signed a letter of intent to exercise options for up to 20 additional 737s. The airline’s entire fleet is made up of Boeing planes.

A fourth purchase commitment came from China’s Ruili Airlines, which has agreed to buy 30 737 MAXs. Ruili is a Chinese low-cost carrier, and the 30 planes are being purchased with the “financial support of AVIC International Leasing.” AVIC is a division of Aviation Industry Corporation, China’s state-owned aerospace and defense company.

And what about Airbus? An executive at the company is predicting a much greater than one-to-one book-to-bill ratio for the company this year, according to a report at Leeham News. The new orders will have to come in the second half of the year, and that is what Kiran Rao, the company’s executive vice-president for marketing and strategy, said will happen: “We’ve got some surprises in store before the end of the year. Not for the [Paris Air] show. … I don’t want to predict how many airplanes we’ll sell this year yet, but it’s not going to be a disappoint[ing] year.” Airbus has forecast sales to be “slightly higher” than the 626 commercial jets the company delivered last year. That is about 75 to 125 fewer than Boeing’s estimated 2015 deliveries of 700 to 750.

Airbus had better get a move on. After a big day on Monday, so far the company has announced a single order for four A320s by Japanese low-cost carrier Peach Aviation.

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