Boeing’s Biggest Deal Ever – Or Maybe Not?

Lion Air - Indonesia's worst airline (for on time arrivals), and banned from flying to the EU for safety reasons, is now hoping to place Boeing's largest airplane order ever

Boeing is on a roll at present, and good for it.

Last Sunday it announced its single largest airplane order ever – an order for fifty 777-300ER planes placed by Emirates Airline, with a list price valuation of $18 billion.

Reading about another mega-order from Emirates is these days almost a commonplace occurrence as the already huge airline (largest in the world by some measures) continues to grow and grow and grow, with increasingly bigger and bigger plane orders being placed to enable its growth.

And now today (Thursday) news emerges of an even larger order for 230 737s and with purchase rights for another 150 in addition to the 230 first being specified.  The first 230 planes have a list price of $21.7 billion (yes, 777 planes are very much more expensive than the much smaller 737s).

So which airline is it to set a new record – Boeing’s largest order ever?  For sure, it will be a mega-airline that we all know and recognize, don’t you think?  Is it maybe Ryanair, known to be in the market for about that number of new 737s or other similar planes at present, and already with 306 of them in service?  Or is it maybe Southwest, also in the market for new 737 type planes, and currently operating 565 of the 737 model planes?

Nope, it is neither of those, nor is it any other major airline of measurable gravitas.  It is (drum roll please) Lion Air.

Yes (drum roll again, please) Lion Air.  What’s that – you’ve never heard of Lion Air?

Well, perhaps that is not surprising.  Lion Air, founded in 1999, is based in Indonesia, and currently operates a fleet of 71 737s, plus two 747s and four MD90s.  It flies to sixty cities in Indonesia, Malaysia, Singapore, Vietnam and Saudi Arabia.  And while it might like to fly to other places, it can’t fly to the EU because it is on the EU’s list of banned airlines (due to safety concerns).  So too are 41 of the other 47 airlines in Indonesia (Indonesia has 48 airlines?).

The airline’s prime claim to fame prior to now is for having the worst on-time record of any airline in Indonesia, and is currently being forced to ground 13 of its 71 planes due to problems meeting ontime operating performance.

An American living in Indonesia writes in reader comments appended to the end of a Seattle Times article announcing the order

This came as a bit of a shock. I’m an American living in Indonesia, and nobody who values their life or comfort flies Lion Air. They’re the cheapest & crappiest. Sorry but that’s their reputation. Interesting to read about this new deal, and I can’t help but wonder where the money is going to come from.

The new sale was proudly announced at a press conference by Indonesia’s favorite son (and our present President), the former Barry Soetoro, or as he is now known, Barack Obama.  His role in the transaction is unclear, because the deal is understood to have been thrashed out and agreed upon at least a month prior to his visit to his former country of residence.

Lion Air already has 125 planes on order from Boeing, and with this additional 230 – 380 more planes, one has to wonder what it is going to do with them all, and where it is going to fly them.  It is one thing for an international airline the size of Emirates (163 planes currently active in their fleet) to order 50 more planes; it is another thing for a regional airline that is operating fewer than 60 planes, and with 125 already on order, to put their hand up for another 230 – 380.

There’s another curious thing as well.  Boeing distributed an appropriately happy and excited press release about its sale to Emirates headed ‘Boeing, Emirates Announce Historic Order for 50 777-300ERs‘, complete with photo attached.

So what does it do for this even bigger better and more historic order?  It sends out a short press release headed ‘Boeing Statement on Lion Air Commitment for up to 380 737s‘, a statement that doesn’t even have a single picture, and which downplays Obama’s role to merely a ‘witness’ at the official ceremony.

The White House also tells us this deal will ‘support’ over 110,000 jobs, although it is vague about what ‘support’ means, and for how long.  With Boeing’s 737 production rate shortly to rise to 42 a month, 230 planes represents a mere 5.5 months of production, and only a small percentage of Boeing’s Commercial Airplanes Group workforce of 78,000people (spread over 70 different countries, not just the US) are involved in assembling 737s.

Do you get the feeling Boeing is unenthusiastic about this  sale  order  commitment (a weaker sort of position that is far from binding), and maybe even feels a bit resentful at the premature prominence being given to something that might never happen, now being used for political purposes?

As for the stock market, Boeing’s stock closed down by almost 1%, rather than up for the day.  Clearly investors too are underwhelmed by this unfortunate bit of political grandstanding.

1 thought on “Boeing’s Biggest Deal Ever – Or Maybe Not?”

  1. Pingback: Weekly Roundup Friday 18 November 2011 » The Travel Insider

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