Boeing (BA, Financial) has bagged a $6.6 billion worth order for the 737 Max 8 and Max 9 aircraft from Copa Holdings S.A of Panama. Copa Airlines, an operating subsidiary of Copa Holdings, would be using these planes to replace part of its existing fleet. The deal has been signed off by Boeing’s CEO Jim McNerney and Copa’s CEO Pedro Heilbron.
The news was revealed on Friday at the Summit of the Americas, which is an assembly of North American and South American leaders, currently being hosted by the capital city of Panama. Both President Barack Obama and Panamanian President Juan Carlos Varela Rodriguez were present when the deal was announced.
Boeing 737 picture from Boeing website
A great deal
Copa Airlines has ordered for 61 737 Max 8 and 737 Max 9, and though the deal value comes at $6.6 billion at list price, it would be lower than that as plane makers offer big discounts, particularly to their loyal customers. The deal size and value may not look as attractive compared with that of wide body aircraft such as the 777 or the 787 Dreamliner that sell at a much higher prices. However, it’s a big win for Boeing considering that the aircraft contract is the biggest deal ever an American company has received from any Panamanian company.
Panama City is the hub of Copa Airlines from where the operator connects 73 destinations in 30 countries, providing passengers quick and convenient movement in North, Central and South America as well as the Caribbean region. Panama City is the most well connected hub in this region and has become Copa’s key profitable center over the years.
The 737 holds an important place in Copa’s strategy
Copa is one of Boeing loyal customers, with a long staunch relation for years. Presently the airline operator flies 98 aircraft of which 72 are Boeing 737. The remaining planes flown by the airline are those of the Brazilian plane maker Embraer (ERJ, Financial), the midsized E190.
The 737 Max 9 could be of particular importance to Copa Airlines, supporting the carrier grow its network in the long haul routes. Heilbron said that "the Next-Generation 737 is the backbone for our fleet today, and our order for the 737 MAX shows our continued commitment for the future to bring people together across all of the Americas using the most modern and efficient airplanes in the sky as well as our Hub of the Americas, in Panama City."
The 737 Max is the reengineered version of Boeing’s bestselling airplane, the 737, with new fuel efficient engines, latest technology, improved reliability, and other design updates. The upgraded version is slated to enter service in 2017. According to Copa Chairman Stanley Motta the 737 Max would support the carrier cement its dominance in the region, while giving its customers maximum benefits of the best technology in the aircraft market.
So far during the year, Boeing has received gross orders of 116 aircraft – 71 for 737s, 3 747s, 7 777s, and 35 787 Dreamliners. After adjusting the orders for cancellation, total orders come to 110 planes, and of that 66 are for 737. This however, excludes the latest 737 order from Copa Airlines. Boeing’s backlog is mounting and around 75% of the total backlog is for the 737 aircraft. Even Airbus (EADSY, Financial) has a huge backlog for the A320 aircraft. Increasing passenger traffic and growing demand for narrow body aircraft will take the 737 and A320 backlog even higher. This is exactly why both Boeing and Airbus plan to increase their narrow body production rate as it’s going to form the core of the global fleet in the future.
The 737 aircraft is the key revenue and cash generator of Boeing. Copa Airlines’ orders for 61 airplanes solidifies the carrier’s relation with Boeing and is a testimony of why the plane is the preferred choice of airlines across the globe.
