Boeing scores $3.15 bil. 737 order
CIT Group Inc., the commercial lender that kept its profitable aircraft-leasing unit after a 2009 bankruptcy, ordered more than three dozen Boeing Co. single- aisle 737 jets valued at a total of $3.15 billion.
The order, CIT's largest for Boeing airplanes, includes 15 extended-range 737-900s and 23 of the Chicago-based company's 737-800s, New York-based CIT said today in a statement. Global demand from the company's airline customers, even in slower markets, is rising, said C. Jeffrey Knittel, who runs the transportation-finance unit.
“People are much more optimistic today than they were a year ago,” Knittel said in a telephone interview “Is that because there's a return in the capital markets? Is it because overall economies are better? It could be a combination of all of that.”
Plane-leasing companies are returning to the market as demand recovers after the global economic crisis. General Electric Co.'s GECAS unit, Steven Udvar-Hazy's Air Lease Corp. and other lessors dominated orders at the Farnborough Air Show in England in July, with several hundred jets bought from both Boeing and its larger commercial rival, Airbus SAS.
CIT's fleet of narrow-body 737s, including on-order and in- service planes, numbered 88 before today's order, compared with about 142 jets in the Airbus A320 family, according to London- based data provider Ascend.
“In an environment where efficiency is important, new aircraft obviously help,” Knittel said. “Airlines are looking to drive down their overall operating costs and airplanes like the 737 allow them to do that.”
Boeing climbed 54 cents to $66.94 at 4:15 p.m. in New York Stock Exchange composite trading. CIT rose 10 cents to $46.45.
John A. Thain, hired as chief executive officer of CIT in February after the company emerged from bankruptcy in December 2009, decided the aircraft-leasing business was “core,” so CIT sold other assets to shrink itself to a set of businesses that could be run profitably.
CIT's bonds climbed to the highest on record earlier today. The 7 percent notes due in May 2015 climbed to 101 cents on the dollar as of 11:23 a.m. in New York, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The debt fell to as low as 86.5 cents on Feb. 5, 2010, Trace data show.
Deliveries of the new Boeing aircraft are scheduled from 2014 through 2017, CIT said in a regulatory filing, adding that it obtained the rights to buy seven more 737s. Purchase prices, which CIT didn't disclose, will be lower than list prices because of discounts, the lender said. The extended-range 737-900's list price is $85.8 million, and the 737-800 is valued at $80.8 million, according to Boeing's website.
CIT's order will add to Boeing's backlog for 2,173 of the 737 model, including at least 447 net orders last year. Boeing is boosting production of the plane, the world's most widely flown commercial jet, to 38 a month in 2013 from 31.5 now, and has said it may push that figure even higher as sales recover.
Boeing is considering whether to offer new engines for the plane or wait and work on a new replacement aircraft. Boeing competitor Airbus said last month it will offer new engines on its narrow-body A320 starting in 2016. That version will be called the A320 NEO, which stands for “new engine offering.”
CIT will consider that airplane and other offerings from aircraft manufacturers, Knittel said.
“We've obviously looked at the NEO,” Knittel said today. “It's important to realize that the NEO really doesn't start to deliver in any significant way until 2017. This order and the NEO in a lot of ways, and other aircraft, whatever that iteration could be, could be compatible.”