Did I say Boeing
Or so it seems this week.
Yesterday, Boeing made the surprising announcement that it's raising the prices it charges on its planes -- yes, tossing its challenge into the teeth of a global recession. In its first price increase in two years, the company's jacking up prices on its planes an average of 5.2% -- twice the hike of its last, circa-2008 price increase.
What's it mean to investors?
Now, before you get too excited, and start adding 5% to your annual profit projections for the company, there are a few caveats to consider. For one ... you have to wonder who's going to be ordering new planes at these higher prices. Sure, Ryanair
It's also worth noting that Boeing's price rise is to a large extent an exercise in "damage mitigation." Delays in delivering the 787 to its long-suffering customers has Boeing facing the prospect of millions -- perhaps hundreds of millions -- of dollars in contractual "penalty payments" for late execution on its contracts. Rather than adding to Boeing's net, therefore, any higher prices the company charges on planes newly sold may be earmarked for simply replacing revenues lost to the lawyers, with their niggling obsession over details like the "promised date of delivery." And speaking of niggling, there's also the fact to consider that Boeing almost never gets its actual asking price for its planes. Discounts for big buyers are simply the order of the day.
Still, raise a price 5% -- and that does give you an extra bit of wiggle room when negotiating to get a customer to sign on the dotted line. Even if this week's news isn't quite as good as it sounds, it's still a far cry from bad.
Fool contributor Rich Smith doesn't own shares of the companies mentioned above. The Motley Fool has a disclosure policy. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.