While the announcement gave an immediate boost to shares of key 737 suppliers Spirit AeroSystems
The second piece of (bigger) news is what Boeing's doing to prepare for landing even more orders down the road. Namely, upping its production rate yet again:
Yes indeedy, Boeing has announced another increase in its monthly rate of 737 production, bumping it up to 38 planes per month. That means Boeing's now planning to build planes 20% faster than it was as recently as April. The full change won't go into effect until 2013, and the recent production boost won't affect fiscal 2010 results, at least not for Boeing. However, its suppliers might begin to ramp capital expenditures to accommodate the production build. But as investors look down the runway, they're clearly seeing good things ahead for Boeing.
Not I. I'm actually a little nervous about the news.
When good news is bad news
Why might additional plane sales -- which, according to Boeing, are worth $3.7 billion in new revenues at "list price" -- be bad news for Boeing? Because these sales won't be at list price. Nowhere near it, unless I miss my guess.
Listen, Fools. Boeing's never been shy about handing out discounts to loyal purchasers. That's par for the course in the jet market. In recent years, we've seen the likes of Continental
When Rosavia ordered its planes back in June, Aeroflot went on record saying that while it preferred to buy planes from Airbus, Boeing could win its business if it were willing to accept "below market prices." Not just below list price, mind you. Below market. Aeroflot wanted a discount on a discount. And now it seems that's just what Boeing gave 'em.
What will this do to Boeing's profit margins? Will the company "make it up on volume," as the saying goes? You tell me. Scroll down to the comments section, and tell us what you think.
Spirit AeroSystems Holdings is a Motley Fool Hidden Gems selection. Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. Rich is not a licensed economist, but he plays one on the Web. Check out his latest stock recommendations on Motley Fool CAPS. The Motley Fool has a disclosure policy.
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