October 14, 2012
Boeing (NYSE: BA ) received a huge order from Alaska Air (NYSE: ALK ) this week for 50 737s, worth $5 billion at list price. Thirty-seven of the planes will be MAXes, a new family of aircraft that's 13% more fuel-efficient than the original 737 model. This is of major importance, considering that fuel can easily exceed 30% of airlines' operating expenses, which underscores a significant problem for the industry today: Because of high fuel costs, airlines have little choice but to spend huge sums of money upgrading fleets to remain competitive. It's no coincidence that every major legacy airline has gone bankrupt -- United, Continental, Delta (NYSE: DAL ) , and now AMR.
While Alaska Air's recent order is certainly good news for Boeing, it's no game-changer -- the aircraft manufacturer currently has 858 orders lined up for the 737 MAX. That's a backlog of more than $350 billion. The question is, though, will Boeing be able to execute on production? And how quickly? The demand is there, but it's an incredibly tall order to fill.
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