Aerospace & Defense

Boeing Adds About $11 Billion to Order Book -- If All Goes According to Plan

The past couple of days have been encouraging for Boeing Co. (NYSE: BA). On Wednesday, Delta Air Lines Co. (NYSE: DAL) said it will acquire 20 of the company’s 737-900ER passenger jets, and Thursday morning China Southern Airlines Co. Ltd. (NYSE: ZNH) announced a commitment to purchase 50 current-model 737s and 30 of Boeing’s new 737 Max airplanes. Xiamen Airlines, a unit of China Southern, has also committed to buy 30 new 737 Max jets.

At list prices the order from Delta is worth about $2.04 billion, and Boeing valued the order from China Southern is valued at $8.38 billion. The Xiamen order is valued at $2.88 billion.

The Delta order is exactly half the number of 737-900ER orders the airline cancelled in July after Delta’s pilots rejected a contract that would have included Delta’s purchase of 20 used Embraer E190s from Boeing. The union objected to the “second-tier” pay scale that Delta planned to adopt as it worked the smaller E190s into its fleet. In Wednesday’s announcement, Delta said it would purchase 20 used E190s from Boeing, as previously planned.

The commitments from China Southern and Xiamen are just that, commitments, not firm orders and will not be added to Boeing’s order book until “all contingencies are cleared.”

China Southern also will sell to Boeing 16 older Boeing planes, 13 757s and three 733s, along with 13 engines, other material and transaction costs for about $106 million spread out over three years.

Delta’s contract with its pilots is targeted for revision by December 31, but it will remain in place even if the deadline passes. A strike is possible, but would be unusual. The agreement with Boeing could be a poke in the eye of the pilots’ union. The E190s, which won’t begin flying for Delta until early 2017, will need certified pilots. The union has not commented yet on the announced purchases.

Boeing’s stock traded up about 0.6% in Thursday’s premarket session to $148.98. The stock’s 52-week range is $115.14 to $158.83.

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