Shareholders of Motley Fool Stock Advisor recommendation Embraer (NYSE: ERJ ) , I bring good tidings of holiday cheer. On Monday, your company announced its "largest Phenom executive jet order" ever. Private-jet company Flight Options signed a contract to buy 100 Phenom 300 business jets, with an option to buy 50 more. Deliveries will begin toward the end of 2009.
The initial order comes to $746 million at list price. Of course, list price is to airplanes what sticker prices are to Ford (NYSE: F ) and GM (NYSE: GM ) , so don't count your proverbial chickens before they start flying 'round the coop. If the options get exercised, though, the tab on this contract could run as large to $1.12 billion -- with an additional $200 million for support and maintenance services. Nice.
So much for the headlines
On the surface, this is certainly good news for Embraer shareholders. The total potential value of $1.3 billion or so amounts to more than a fiscal quarter's worth of revenue at the Brazilian plane maker. (Salespeople, take the rest of the quarter off. Assemblers, get to work.)
Care to read between the lines with me, though? Looking farther afield, Embraer's gain would appear to be Textron's (NYSE: TXT ) and Hawker Beechcraft's loss. Planes from both companies (Cessnas and Hawkers, respectively) currently form the bulk of Flight Options' fleet. Partly, this shouldn't come as a huge surprise. After all, Flight Options is a Raytheon (NYSE: RTN ) subsidiary. And Raytheon spun off its business jet operations last year. Like Hertz (NYSE: HTZ ) post-Ford, an emancipated Flight Options has little reason to buy from its ex-parent if it can get aircraft for a better price elsewhere.
Looking even further afield, the Embraer contract tells us that business is booming in the business-jet-rental industry. According to its website, Flight Options only has 130 or so planes in its fleet today. And now it wants to buy perhaps 150 more? Sounds to me like demand is increasing exponentially, which is good news for Raytheon, for Berkshire Hathaway (NYSE: BRK-B ) subsidiary NetJets, and even for Textron -- which has its own rental agency, CitationShares.
Seems Christmas may come early for a whole lot of people this year.
RSS Headlines
Fool UK