Per major media sources, The Boeing Company BA is reportedly close to clinching a multibillion-dollar deal from Southwest Airlines LUV for its 737 MAX 7 aircraft. Per a report by Reuters, as Southwest Airlines plans on refreshing its fleet, it intends to potentially place 130 firm orders alongside significant options for 170 more 737 aircraft.
At list prices, the transaction amount for 130 737 Max jets would be about $13 billion, although there remains huge scope for discounts. Boeing’s shares gained 6.4% to close at $245.34 on Mar 10, post the announcement of this prospective mega deal.
Significance of the Deal for Boeing
At a time when the entire aerospace industry is witnessing a downturn, this prospective deal could be of massive significance to Boeing, which witnessed around 460 order cancellations for the 737 MAX jets in 2020. The deal is likely to get accomplished as Southwest Airlines, in December 2020, revealed its intentions to resume commercial flight services and fly its Boeing 737 MAX from March 2021. More so, the news of a possible deal will likely boost the company’s confidence in approaching other buyers for the 737 MAX jets.
What’s Favoring Boeing Of Late?
Ever since the grounding of Boeing's 737 MAX aircraft, the company made a series of upgrades to the plane and inducted several pilot training protocols, which finally enabled it to receive an approval from the Federal Aviation Administration (“FAA”) in November 2020, certifying that the 737 MAX is safe for flying.
The approval had an instant positive impact on the company as it cliched orders for 75 additional 737 MAX airplanes in December from Europe's largest airline company — Ryanair. Also, during the same month, Alaska Airlines ALK agreed to buy 23 737 MAX 9 jets. Recently, in March, per a CNBC report, United Airlines UAL announced that it is buying 25 additional 737 Max planes and taking delivery of other orders earlier than previously planned from Boeing as well.
If the deal with Southwest Airlines materializes, it will surely benefit Boeing, which has been losing ground to its arch rival Airbus SE over the past couple of years, following 737's grounding in March 2019.
Price Performance & Zacks Rank
Shares of this Zacks Rank #4 (Sell) company have gained 58.5% in the past year compared with the industry’s growth of 22.1%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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