Will Boeing Get An Order For 737 MAX From Qatar Airways?

While Qatar Airways and Airbus Group (PA:AIR) SE (OTC:EADSY) are at loggerheads over unresolved faults related to the latter’s A320neo model, the situation may turn out to be beneficial for The Boeing Co. (NYSE:BA) . According to sources, Boeing is presently in talks with the airline for an order of up to 30 jets.

Factors Driving the Potential Order

Earlier this year, Qatar Airways cancelled the first delivery of the A320neo jets due to delayed dispatch of the same. At the Farnborough Air show, the airline’s Chief Executive Officer (“CEO”), Akbar Al Baker had said that further cancellations would follow unless Airbus takes the necessary steps to adhere to the delivery timeline. To date, Qatar Airways has received only one jet out of the 10 that were supposed to be delivered this year.

There is, however, another reason behind Qatar Airways’ cancellation of its order for the A320neo jets. The airline has been facing some problems from the jet’s engines, which are manufactured by Pratt & Whitney, a subsidiary of United Technologies Corp. (NYSE:UTX) . With regard to this issue, Baker has warned Airbus that the airline will not accept any order delivery until the problems have been dealt with.

Meanwhile, the airline intends to look for other companies that can meet its demand for planes.

The Farnborough Air Show also saw Baker revealing Qatar Airways’ plans to purchase 25–30 jets, including the current 737 Next-Generation model and the upcoming successor of 737 MAX. The airline intends to enter into agreements as soon as certain issues have been resolved.

Other Potential Deals Inked at the Air Show

Boeing’s 737 Max has been gaining immense popularity in recent times with the company witnessing a rise in the number of orders for the same.

Besides the Qatar Airways deal, Boeing expects to win order from China’s Donghai Airlines, which has plans to purchase 25 737 MAX 8s and 5 787-9 Dreamliners. The deal is valued at over $4 billion at list prices. Boeing will work with Donghai Airlines to finalize the details of the agreement.

Moreover, Boeing has signed a memorandum of understanding with Xiamen Airlines to supply 30 737 Max 200 jets. The deal is valued at $3.4 billion at current list prices. Boeing will work with Xiamen Airlines to finalize the agreement. The deal, however, needs to be approved by Xiamen Airlines’ board, China Southern Airline Group’s board and the Chinese government.

Details of the 737 Max Jet

The 737 MAX is the fourth generation of the 737 family of aircraft and a successor for the 737 Next Generation. Notably, the new jets use the bigger and more efficient CFM International LEAP-1B engines. The aircraft offers aerodynamic wings and winglets, and its cockpit displays have been borrowed from the 787. It is also 20% more fuel efficient than its predecessors, with 8% less operating costs than Airbus's A320neo. It is scheduled to enter service in 2017.

Boeing announced that it would increase the capacity of the 737 Max 7 jet by 12 seats in order to compete with Bombardier Inc.’s (OTC:BDRAF) C Series model.

Boeing’s Q2 Performance

Recently, Boeing reported second-quarter 2016 delivery figures. Commercial deliveries were up 1% to 199 airplanes, driven by higher demand for the 777 and 787 Dreamliners. Sequentially, deliveries witnessed a 13.1% improvement. However, deliveries of the single-aisle 737 slipped to 127 from 128 a year ago, as the company had been busy with the development of a newer version of its most popular plane, the 737 MAX.

Boeing received 171 commercial orders comprising 147 units of the 737, 6 units of the 767, 2 units of the 777 and 16 units of the 787 Dreamliners.

The company currently has a Zacks Rank #3 (Hold).

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