Boeing (BA, Financial) and SMBC Aviation Capital announced an order for 80 737 MAX 8s, valued at more than $8.5 billion at marked prices. This is the largest single order for 737 MAXes from a leasing company and will help SMBC Aviation Capital grow its portfolio of high-demand, fuel-efficient airplanes. Commercial Aircraft Corp. of China Ltd also announced 30 new commitments for the C919, in an attempt to break Boeing and Airbus Group’s grip on the global aircraft market.
Management comments
"It is 10 years since our business placed its first order with Boeing and we have enjoyed a decade of successful partnership since then," said Peter Barrett, CEO, SMBC Aviation Capital. "The 737 MAX 8 is one of the most fuel efficient and versatile aircraft available, and today's announcement shows our ongoing commitment to the new generation of the popular 737 family, as well as our appetite to keep broadening and deepening our platform in order to service our customers' requirements. Following this order and given the clear commitment of our shareholders and the strength of the global aircraft leasing sector, we remain very confident in our ability to continue to deliver long-term growth."
"This order is another example of our history of partnership with SMBC Aviation Capital and Japan," said Boeing Commercial Airplanes President and CEO Ray Conner. "Today's announcement from a top leasing company is a vote of confidence in our 737 MAX and helps SMBC Aviation Capital capture the strong demand in the single-aisle market."
Competition from Chinese aircraft maker
The state-owned company, also known as Comac, signed an initial agreement with China Merchants Bank Ltd.’s leasing unit, the planemaker said at the Zhuhai Airshow in China today. Including today’s deal, Comac now has 430 orders from 17 clients for the 168-seat C919, the company said in a statement. “This will help the development of Chinese civil aviation,” Comac’s Chief Financial Officer Tian Min said in the statement. The orders may help Shanghai-based Comac’s C919 get more acceptances among Chinese buyers, whose pledges have helped mask a shortage of overseas orders. Airbus and Chicago-based Boeing Co. both expect China’s economic boom to help the country become the world’s largest market for passenger planes by overtaking the U.S. in two decades. Comac aims to complete the full assembly of the C919 by August 2015 and conduct the first test flight by the end of next year, Yu Zemin, deputy general manager of COMAC Shanghai Aircraft Manufacturing Co., said at a conference in Shanghai in September.
The deal
With this deal on the go, SMBC Aviation Capital becomes the 50th 737 MAX customer and grows the program's order book to more than 2,400 airplanes. SMBC Aviation Capital and Boeing celebrated the announcement earlier today at a signing ceremony in Tokyo. SMBC Aviation Capital has 180 Boeing airplanes in its portfolio and has 95 airline customers in more than 40 countries. The analysts at Boeing have forecasted that airlines will need more than 25,600 single-aisle airplanes like the 737 MAX over the next 20 years.
The 737 MAX incorporates the latest technology CFM International LEAP-1B engines, Advanced Technology winglets and other improvements to deliver the highest efficiency, reliability and passenger comfort in the single-aisle market. The 737 MAX will be 14 percent more fuel-efficient than today's most efficient Next-Generation 737s – and 20 percent better than the original Next-Generation 737s when they first entered service. The performance of Boeing has been efficient, and the company is slated to keep performing this way in the coming quarter.
