Transportation

Boeing, EADS Taking Names (BA, GE, EADSY)

To mark the beginning of the world’s largest air show at Farnborough, Boeing Co. (NYSE: BA) has announced two large orders. Dubai’s Emirates Airlines plans to buy 30 plans Boeing 777 long-range jets and GE Capital Aviation Services, a division of General Electric Co. (NYSE: GE) order 40 of Boeing’s 737-800 planes.

Not to be outdone, EADS (OTC: EADSY) has announced that Air Lease Corp. has ordered 51 Airbus A320 jets in an order worth a nominal $4.43 billion. The Boeing orders are valued at more than $12 billion at full list price. Russian carrier Aeroflot ordered 11 Airbus 330 jets, valued at about $2.34 billion. Because all the contracts are for multiple planes, significant discounts to the list price are quite likely.

The big competition between Boeing and Airbus remains the battle over the US Air Force’s $35 billion contract for a new air refueling tanker. Bids for that contract closed 10 days ago and a decision, the third in a long string of decisions and reversals that goes back to 2001, is due in November.

Emirates Airlines already operates the world’s largest fleet of 777s, with 86 planes currently in service. The order announced today includes 30 777-300 Extended range planes that can carry 365 passengers about 8,000 miles non-stop.

GE Capital Aviation Services leases and finances some 1,800 aircraft with about 245 airlines in more than 75 countries. Air Lease Corp., which order 51 planes from EADS, is a new company founded by one of the original founders of International Lease Finance Corp., IFLC. Air Lease expects to own more than 100 planes be early 2011.

The next battleground between Boeing and EADS/Airbus is over the new mid-sized, twin-engine, wide-body airliners. Boeing’s 787 Dreamliner was first out of the blocks, and the company claimed 866 of the planes had been ordered as of April 2010. The competitor plane from Airbus, the 350, has been slower getting started, but as airlines phase out older, less fuel-efficient planes in the future, the competition for customers will heat up dramatically. Boeing’s 787 Dreamliner has just made its first transatlantic flight, arriving in Farnborough yesterday.

Commercial planes are expected to continue to sell well as passenger traffic increases. Military planes, the Air Force tanker contract aside, is expected to pull back as governments look for ways to cut budgets. A strong euro also hampers EADS because airplanes, like crude oil, are priced in dollars.

But for today, both Boeing and EADS are seeing small improvements in share prices. There’s nothing like a few billion dollars worth of orders to put a little air under a company’s wings.

Paul Ausick

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