Good News Keeps Coming For Boeing
Boeing Co.‘s (NYSE:BA) latest project, the new 737 MAX passenger jet, will be 13 percent more fuel efficient than other 737 models, a figure higher than had previously been estimated.
This is also good news for British travel company Tui Travel, which just bought 60 of the planes with an option for 90 more. Tui Travel is the world’s largest tour operator and owns six European airlines. The company bought the planes at what they said was a “significant discount” from the list price of $6.09 billion in a move to reduce fuel costs.
The deal is so large that it represents a class 1 transaction and so will require shareholder approval. Analysts believe the big purchase reflects confidence from the company, which needs to begin replacing its aircraft fleet while also cutting fuel costs. ”Being able to offer our customers the most advanced, comfortable aircraft, whether they are travelling with us to short or long-haul destinations, while reducing our environmental impact, will only strengthen our position,” said TUI Travel Chief Executive Officer Peter Long.
The deal is a blow to Boeing’s biggest rival, European aircraft maker Airbus. The 737 MAX competes with Airbus’ A320neo. The A320neo was launched about 9 months before the 737 MAX, and has received 2,125 firm orders in comparison with the MAX’s 1,376.
Boeing is looking to steal more business in Europe from Airbus, courting British low-cost airline EasyJet for an order of the new 737 model. The airline is set to place a firm order for either 100 737 MAX jets or 100 A320neo’s. EasyJet currently has an all-Airbus fleet, and the European company is thought to be the favorite for the deal. The airline has said it would like to remain a single-manufacturer fleet, but has also thrown around the idea of switching over to using Boeing planes.
The 737 MAX jets contain CFM LEAP-1B engines and are due to enter production by 2015. Boeing has been readying its 737 factory in Renton, Washington to begin work on test models of the new plane. Flight testing is expected to begin in 2016, and Boeing is set to fill Tui Travel’s massive order between January 2018 and March 2023.
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