It's official, folks. Boeing
Way back in June, UAL
Boeing didn't bite.
Rather, as we gather from United how the contest ended, Boeing and Airbus both produced offers too good to ignore but insufficiently obsequious to win the entirety of United's business. United ended up splitting the prize money, in promising to purchase 25 Dreamliners from Boeing and 25 A350 jets from Airbus, with options for the purchase of 50 more planes from each manufacturer. On Thursday, UAL and Boeing finally put pen to paper and finalized the deal, which Boeing describes as "a new chapter with the 787 Dreamliner" and one "valued at $4.2 billion at average list prices."
You never count your money ...
Good news? Certainly. Just not for the reason Boeing investors think. But before investors credit Boeing with the full $4.2 billion, and recalculate how much the stock might be worth based on these new revenues, it's worth remembering that the actual monies received will come in below 4.2 bills.
Big deals like the one United inked routinely require big discounts to make the sale. Boeing plays coy about its pricing, but details do slip out from time to time. For example, when Boeing supplied Ryanair
... till the dealing's done
Indeed, according to consulting firm BK Associates, discounts in airliner sales are "normally at least 15 percent" and that "[d]iscounts of 35 to 50 percent are often applied for airlines placing large orders." And at the risk of stating the obvious -- a sale of 25 to potentially 75 Dreamliners is a "large order." Not as large as 150 planes, but still pretty darn big.
Moral of the story: United's check is in the mail, and that's good news for Boeing shareholders. Just don't be too shocked when, upon opening the envelope, you discover it's not as big a check as Boeing makes it out to be.
Boeing's stock has nearly doubled over the past year. How do you know when a stock has "topped," and when it still has room to run? Find out here.