Boeing
Air Canada has agreed to purchase 18 of Boeing's 777 planes as well as 14 787s, an acquisition valued at $6 billion at list prices. In addition, the airline secured the right to purchase an additional 46 787s. In the press release disclosing the deal, Robert Milton, CEO of Air Canada's parent company, ACE Aviation Holdings, more or less stated the business case for the 787 by noting that Air Canada expects a 30% cost savings from the 787 vs. the plane it will replace, the 767.
The takeoff in 787 orders comes at an opportune time for Boeing. The company has been rocked by scandals, including the recent resignation of Harry Stonecipher as president and CEO. Meanwhile, Airbus has been threatening to launch a rival to the 787 by modifying its existing A330 jet. That possibility prompted Boeing to intensify its charges that Airbus receives an unfair advantage in the form of launch aid from its European host governments.
The success of the 787, however, belies Boeing's claims of unfairness. Indeed, Airbus' launch loans did lower that firm's risk of launching new planes, since the European outfit would not have had to repay the loans if its aircraft failed in the marketplace. But Airbus' planes did not fail. In fact, they succeeded in taking share from Boeing, in large part because Airbus jets were better than Boeing's offerings. Now, though, it seems Boeing has built the better mousetrap, and it is taking back share.
Boeing has indicated that its 787 is now "sold out" through 2010. Even taking into account the vagaries of the commercial airline sector, the Dreamliner looks like it will be a long-term winner thanks to its superior economics. For Boeing, that's reason to celebrate.
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
