Boeing Extends 737 Max Sales as Alaska Boosts Order

(Bloomberg) -- Boeing Co. extended its sales streak of 737 Max jets as Alaska Air Group Inc. boosted an order agreement to 68 jets and announced plans to return to a mainline fleet with a single aircraft type.

The airline will stop flying 20 of its Airbus SE A320-family planes immediately, prompting a one-time charge of as much as $250 million this quarter to return the aircraft, according to a company regulatory filing Tuesday. Alaska will end the year with 31 Airbus jets, which it got from buying Virgin America four years ago.

The Alaska order, with an estimated value of $3.3 billion, buttresses Boeing’s effort to sell the Max amid the worst aviation downturn on record and the longest grounding in U.S. history. Meanwhile, airlines are pressing for price breaks as they prepare for a slow travel rebound.

With the deal, Boeing continued to boost sales of its workhorse single-aisle jets since U.S. officials cleared the Max to resume flying last month, including a 75-plane order by Ireland’s Ryanair Holdings Plc.

“There is a huge advantage to a simple, single fleet structure,” Alaska Chief Executive Officer Brad Tilden said in video interview ahead of the announcement, citing lower ownership costs from maintenance, training and other expenses.

The airline was unchanged at $50.22 at 11:56 a.m. in New York. Boeing fell less than 1% to $218.20, paring earlier gains as the broader market slumped on coronavirus concerns.

Before the Virgin America deal, Alaska had a long history as an all-Boeing operator. The Seattle-based company is also a corporate neighbor of the planemaker’s factories in the Puget Sound region.

The carrier boosted its Max 9 order from a previous deal for 32 that it placed in 2012. The latest agreement includes new orders for 23 planes, plus a pact announced last month to lease 13 Max 9 jets from Air Lease Corp. The lessor agreed to buy 10 A320 planes from Alaska.

The jets will carry 178 seats, the same as Alaska’s existing fleet of older 737-900 and 737-900ER aircraft.

‘White Tails’

The carrier’s order includes nine so-called “white tails” -- the industry term for new jets without buyers -- that Boeing will rework for the airline. The manufacturer is scouting takers for about 100 of the 450 aircraft that it built but never delivered during the 20-month grounding. Aviation regulators grounded the Max in March 2019 following two crashes that killed 346 people.

Avitas, an aviation consulting firm, estimates a current market value of $48.5 million for Max 9 jets built in 2020. That would put the value of Alaska’s 68 planes at about $3.3 billion, although the airline didn’t reveal the deal’s terms.

Alaska will take 13 Max 9 aircraft next year, with the first delivery in January and commercial service starting two months later. Those planes will be followed by 30 in 2022, 13 in 2023 and and 12 in 2024.

The company will shed its last Airbus A320s in 2025 but will retain a fleet of 10 A321neos, according to the regulatory filing. Alaska expects cash expenses of $110 million over the next two years to return Airbus planes to lessors.

With the changes, Alaska’s overall fleet will increase to 322 planes by the end of 2023 from 291 currently -- a limited capacity boost as the company prepares for a slow travel rebound after the coronavirus pandemic caused an unprecedented collapse.

The carrier will also have options for 52 additional Max aircraft, with rights for the larger and smaller versions.

©2020 Bloomberg L.P.