Does SpiceJet’s $23 Billion Order for 205 Boeing Jets Change Anything?

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Boeing Co.’s (NYSE: BA) Friday morning announcement of a significant order from India’s SpiceJet was expected; the size of the order was not. Maybe it’s all about how Boeing counts things.

The company did not actually add any new planes to its order book, even though the aircraft maker said that SpiceJet had made a “commitment for up to 205 airplanes.”

Here’s the money paragraph from the press release:

Booked at the end of 2016, the announcement includes 100 new 737 MAX 8s, SpiceJet’s current order for 42 MAXs, 13 additional 737 MAXs which were previously attributed to an unidentified customer on Boeing’s Orders & Deliveries website, as well as purchase rights for 50 additional airplanes.

In other words, 155 planes had already been booked and the other 50 are a commitment from SpiceJet to hold its place in line, just in case the airline decides to buy more planes at some future date.

The value of the order at list prices has been set at nearly $23 billion, which assumes that all 205 planes are 737 MAX 8s. SpiceJet surely will not pay full list price for the planes. A discount of around 40% to the list price of $110 million for a 737 MAX 8 would not be unusual, and the discount could go higher.

SpiceJet narrowly avoided bankruptcy in 2014, but the low-cost carrier appears to be fully on its feet again. Its current fleet of 32 Boeing 737s places it among the top carriers in India’s fast-growing market.

In Friday’s premarket session, Boeing shares traded up about 0.5%, at $159.00 in a 52-week range of $102.10 to $160.07. Shares closed down about 1.1% on Thursday at $158.29. The stock’s consensus 12-month price target is $158.90.