Boeing nabs jumbo plane order

Southwest Airlines will become the launch customer for the aircraft maker's new 737 Max.

By Kim Peterson Dec 13, 2011 3:42PM
Boeing (BA) continues to get interest from customers for its fuel-efficient jets. The company said Tuesday it won a huge order from Southwest Airlines (LUV) for 208 planes.

The order includes 58 of Boeing's current 737s. The rest of the order will be filled with the new 737 Max, a single-aisle jet that promises to be 10% to 11% more fuel efficient than current models. If the plane fulfills expectations, it could become the new workhorse in Boeing's single-aisle 737 lineup.

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Shareholders of both companies were not surprised by the deal, since rumors of it had been swirling for days. Boeing shares rose more than 1% in afternoon trading, while Southwest shares fell by more than 1%.

The order is close to $19 billion at list prices. But after standard discounts, the real market value is about $10.5 billion, The Seattle Times reports. Southwest likely even got a better deal than that, since it already had 142 firm orders on its books. Southwest will pay $12 billion for all 350 planes over the next decade, the Times reports -- about $34 million per airplane.

Southwest has been a loyal Boeing customer for years, operating the world's largest Boeing fleet at about 700 737s. The airline said it had considered buying the A320neo from rival Airbus but decided to go with Boeing 737 Max for several reasons. One is that the Max will be better for the shorter runways at Chicago's Midway Airport, reports TheStreet.com.

Southwest won't see the first Max deliveries until 2017. It's not an entirely new jet but instead is a new-engine variant of Boeing's single-aisle plane, The Wall Street Journal reports. The jet will have engines developed by a joint venture of General Electric (GE) and France's Safran SA (SAFRF).

The deal caps an impressive year for Boeing. Shares are up about 8% this year.

Tags: BALUV
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