Boeing’s Luxury-Jet Sale Breaks Order Drought for Grounded Max
Boeing has won a handful of deals for luxury jets amid a significant downturn for jetliner orders.
(Bloomberg) -- Boeing Co. snagged a deal for a business-jet version of its 737 Max in September, breaking a sales drought for the narrow-body aircraft that has been grounded since March.
The order by an anonymous customer, recorded on the company’s website Tuesday, was the first Max deal since British Airways owner International Consolidated Airlines Group SA announced its intent in June to buy 200 of the planes. That blockbuster agreement hasn’t yet been consummated, leaving net sales for the Max at negative 184 for the year, according to company data.
Boeing has won a handful of deals for luxury jets amid a significant downturn for jetliner orders, which has also crimped sales at the company’s European rival, Airbus SE. While both planemakers face weaker demand for planes amid trade wars stoked by U.S. President Donald Trump, Boeing also has to contend with investigations and lawsuits questioning the safety of the Max following two deadly crashes.
The U.S. manufacturer’s business jet division has landed two orders apiece this year for kitted-out Max jets and 787 Dreamliners, according to its website. The aircraft typically are flown from the factory to an interior finishing center, where they are outfitted with custom-designed lounges, conference rooms, master bedrooms and even showers for customers ranging from business tycoons to heads of state.
Boeing has 18 total sales of business-jet versions of the Max, and 11 for the Dreamliner.
The shares fell less than 1% to $374.10 at the close in New York as the broader market slumped on renewed U.S.-China trade tensions. Airbus climbed less than 1% to 117.70 euros at the close in Paris.
‘Anemic’ Market
September order activity was “anemic,” aerospace analyst Cai von Rumohr of Cowen wrote in a note to clients Tuesday. Airbus has brought in only 127 net orders this year, but that’s still far more than Boeing, which has recorded 84 more cancellations than sales.
In the third quarter, Boeing delivered 63 jetliners, down from 190 jet shipments a year earlier. The total was 12 short of Cowen’s estimates, and probably pared $900 million from the planemaker’s third-quarter revenues and 25 cents to 30 cents from estimated earnings per share, von Rumohr said. The shortfall probably resulted in a cash outflow of $1.7 billion to $2 billion for the quarter, he said.
Wide-Body Risk
Looking ahead, Boeing and Airbus face significant risk in maintaining production of their wide-body jets beyond 2021 as signs grow of a glut in the market for long-range aircraft, Bernstein analyst Douglas Harned said in a report Tuesday.
Boeing has netted 52 orders for its carbon-composite Dreamliner this year, so far. The Chicago-based company will need to match that tally next year to avoid a steep cut in output from the record pace the company adopted as crisis engulfed the Max. The Dreamliner still has about 50 unfilled delivery slots starting in 2022, Harned said.
In boosting Dreamliner output to a monthly pace of 14 jets, Boeing executives predicted a wave of orders to replace aging twin-aisle aircraft starting in the early 2020s. But the replacement opportunities aren’t sufficient to maintain production at that pace, Harned said.
Other factors could still support Dreamliner production, from the end of Airbus’s A380 superjumbo jet to a potential trade deal that restarts Boeing’s sales in China. Boeing could also offer discounts on the popular 787 to compensate Max customers for the disruption from the global flying ban, he said.
“We have heard this is a concern for Airbus as it seeks to sell A330neos versus the 787,” he wrote.
To contact the reporter on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net
To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Richard Clough
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