Never let it be said that I lack a keen understanding of the obvious.
Two weeks ago, I made the unsurprising observation that if Boeing
None of the above
Turns out, the company that will be buying Boeing 737s, and sending follow-on revenue through to engine makers General Electric
At list prices running up past $80 million apiece, today's announcement could amount to a potential $1.6 billion in additional revenues for Boeing. However, in a press release of its own, boasting of its negotiating skills, Air China noted that the particular models being purchased will cost closer to $1.4 billion -- and that AC landed "significant price concessions."
The phrase "significant price reductions" would seem to confirm my fears of Boeing scrapping profit margins in exchange for market share. However, a level of price concessions below list value is common in these kinds of deals, and with some variable pricing still to be sorted out, and Air China paying roughly in line with the low end of list prices, the airline's boast may be exaggerated. Also, consider this good news inferred from this morning's report. Boeing's twin rate increases this month added 42 planes to the company's annual production quota. Russian carrier Rosavia's orders potentially account for three years' worth of the new production. Air China's order claims fewer than six months' worth.
So who's buying the rest of the new 737s? -- the 31.5 planes per month that Boeing was already churning out before the rate increases were announced?
Answer: Any and all of the airlines already named above. These eggs are still in the coop, just waiting to be hatched. I suspect we'll see more good news break over the next few weeks. Twenty planes is nothing to scoff at, but I suspect larger orders are ahead. Stay tuned.