Military
Delta Cancels 787 Order, Airbus Cuts A380 Production
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All in all, Wednesday is not shaping up as a good day for the world’s two largest aircraft makers. Late Tuesday, Delta Air Lines Inc. (NYSE: DAL) said in a statement that it has cancelled an order for 18 Boeing Co. (NYSE: BA) 787 Dreamliners. Neither Delta nor Boeing elaborated on the announcement.
On Tuesday, Airbus announced a delay in delivering 12 superjumbo A380s to Emirates airlines, the latest in a string of cancellations and delays for the plane. The company said in July that it would cut production of the plane to just 12 per year beginning in 2018. According to The Wall Street Journal, Airbus had planned to build about 20 A380s next year, down from 27 in 2015.
The Delta cancellation came as no particular surprise. The 787 order had been placed by Northwest Airlines prior to its merger with Delta in 2008. Two years later Delta deferred delivery on the planes until after 2020, a move widely interpreted to signal the ultimate cancellation of the order
At current list prices, Delta’s cancellation will cost Boeing more than $4 billion. In its statement, Delta reaffirmed its intention to take delivery of a total of 120 single aisle 737-900ERs. A Delta executive said:
Delta is one of the world’s largest operators of Boeing aircraft and our valued partnership with Boeing will remain strong as we safely and comfortably serve our customers across the world every day. This business decision is consistent with Delta’s fleet strategy to prudently address our widebody aircraft needs.
Airbus’s A380 turned the corner to profitability last year and had hoped to remain so. The delivery delays and production cut now indicate that the program will return to loss-making. Airbus noted that the impact of the Emirates decision on its ability to break even on the A380 in 2017 is “minimal.”
Boeing’s stock traded down about 0.6% Wednesday morning, at $156.58 in a 52-week range of $102.10 to $160.07. The stock’s 12-month price target is $156.50.
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