Aerospace & Defense

Boeing in Talks for $30 Billion Order From China

Paul Ausick

Citing people familiar with the talks, Bloomberg reported Wednesday that Boeing Co. (NYSE: BA) is negotiating an order for about 100 of its wide-body 787 Dreamliners and still-to-be-delivered 777X wide-bodies with unspecified Chinese airlines. Depending on the final mix of planes included in such an order, the deal could be worth around $30 billion at list prices.

The 777X is Boeing’s newest plane, and its first test flight is scheduled for later this month. Not only is this the company’s newest plane, but it is also Boeing’s most expensive, with a single plane costing $442.2 million, according to the company’s price list.

There are more than a few wrinkles that need to be ironed out. Not least is the current trade war with China that could see a tax of up to 25% added to the cost of a 777X if China chooses to impose a tariff on airplanes in response to U.S. threats of tariffs on all Chinese goods.

Assuming that Boeing’s pre-delivery schedule is met, the first 777X is on track to be delivered to Emirates in the middle of next year. Given the obstacles Boeing faces related to certification of its 737 MAX following two fatal crashes that killed 346 people, the certification of the new plane could be more exacting for the company. Several civil aviation authorities around the world, including in China, have indicated that they will conduct their own inquiries into the airworthiness of the 737 MAX once Boeing installs a fix for the problem believed to be the cause of the two fatal crashes.

Shipments of and new orders for aircraft were down sharply in April, according to the latest report on factory orders from the U.S. Census Bureau, and there’s no doubt that a massive order of this kind would put some life back into the U.S. balance of trade. New orders for U.S. manufactured goods would get a real boost from an order for 100 Boeing aircraft. Last month, new orders for U.S. goods dropped by more than 25%.

British Airways placed a firm order for 18 of the new 777X aircraft in March. Before that, the last order for the plane was posted in June of 2017 by Singapore Airlines, which ordered 20. According to Boeing’s order book, the company has received 344 orders for the new plane.

Boeing’s stock traded up about 0.9% in the mid-afternoon Wednesday, at $347.74 in a 52-week range of $292.47 to $446.01. The 12-month price target on the stock is $421.05.