Air China Ltd. (753), the nation’s biggest carrier by market value, agreed to buy two Boeing Co. (BA:US) 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 yesterday. 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. Yesterday’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 yesterday. 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 yesterday 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 yesterday. Boeing gained 0.5 percent to $77.28 in New York.
Separately, Cathay Pacific Airways Ltd. said yesterday it canceled an order for eight Boeing 777-200 freighters and instead has agreed to buy three 747-8 freighters. It also has options to purchase five 777-200 freighters and will sell four 747-400 converted freighters to Boeing as part of its fleet restructuring, the carrier said in a filing to Hong Kong’s stock exchange.
Boeing expects to increase its deliveries to China by 60 percent this year, the head of its operations in the country was quoted as saying in today’s China Daily. More than 120 aircraft will be delivered to the country’s airlines this year, with single-aisle planes such as the 737 the most popular type, Marc Allen, president of Boeing China, was cited as saying.
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