Air China Ltd., the nation’s biggest carrier by market value, agreed to buy two Boeing Co. 747-8 aircraft in the planemaker’s first sale of the models this year.
Air China also will purchase one wide-body 777-300 plane, 20 single-aisle 737-800 jets and eight 777 freighters, according to a statement. The planes have a combined catalog value of $4.8 billion and Boeing granted “significant price concessions” through credit agreements, the airline said in the statement.
Boeing, based in Chicago, hasn’t sold more than five 747-8 aircraft a year since Deutsche Lufthansa AG purchased 19 of the planes in 2006, and concern that persistently weak demand could prompt the company to curtail production has been mounting. Today’s orders may help alleviate some of the pressure, according to Stephen Levenson of Stifel Financial Corp.
“There has been concern that the dearth of orders could mean whitetails on the tarmac or insufficient demand to keep build rates at the current two per month,” the New York-based analyst wrote in a note to clients today. Boeing “has been making a major effort to book more 747-8 orders particularly from carriers in the Asia-Pacific territory that may be best- suited to their use.”
That helps to balance the production schedule and backlog, said Levenson, who recommends buying the shares.
The 747-8, 777-300 and 737 aircraft ordered today have a catalog value of about $2.6 billion, while the 777 freighters command about $2.2 billion. The agreement also includes the right to sell seven older 747 freight models back to Boeing and the option to convert four of the new 737 orders to one additional 777-300 jetliner, Beijing-based Air China said.
Air China rose 3.5 percent to HK$6.50 at the close in Hong Kong today. Boeing gained 0.5 percent to $77.28 in New York.Copyright © 2014 Paddock Publications, Inc. All rights reserved.