Boeing Stock: Airbus Near Ethiopian Airlines Jet Order As Boeing, Embraer Venture Delayed

Airbus (EADSY) is close to sealing a deal with Ethiopian Airlines to supply it with up to 20 A220 planes. Meanwhile, European regulators are delaying the planned Boeing (BA) joint venture with Brazil’s Embraer (ERJ). But Boeing stock rose, while Airbus stock fell.


Africa’s biggest profitable carrier is now in late-stage talks about the purchase of the 100-seat narrow-body A220 jets, according to Bloomberg. CEO Tewolde GebreMariam said the deal should be completed by the end of the year.

The firm had been using the larger Boeing 737. However The Boeing 737 Max has been grounded since the Ethiopian Air crash in March which left 157 people dead. The incident occurred just months after a Boeing 737 Max operated by Indonesia’s Lion Air crashed, killing 189.

Tewolde said Ethiopian Airlines will be the last to resume flights of the Boeing 737 Max. The carrier still has 28 Max aircraft on order. If it goes ahead, the A220 order will be the carrier’s first jet order since the deadly Boeing 737 Max crash. One reason Ethiopian Air says the smaller Airbus A220 will more direct flights possible without stop offs.

The Airbus deal could be worth more than $1.6 billion, as each A220-100 costs $81 million each according to list prices. However airlines usually get steep discounts for large orders.

Boeing-Embraer Deal Delayed Again

Meanwhile the Boeing-Embraer tie-up has hit another snag, with the move now to be delayed until next year while European regulators review the deal.

Boeing announced July it would take over the commercial unit of Embraer as part of the joint venture.

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Embraer’s commercial operations are valued at $4.75 billion under the deal and Boeing’s 80% stake is worth $3.8 billion.

“The European Commission recently indicated it will open a Phase II assessment in its review of the transaction,” Boeing said in a statement. “Based on this development, however, the companies now expect the transaction to close in early 2020.”

The Boeing-Embraer deal will boost Boeing earnings per share beginning in 2020. The venture creates an estimated annual pretax cost savings of about $150 million by the third year, according to the companies. Boeing could give more details when it releases second-quarter results on July 25.

The two firms received approval from Embraer shareholders in February for Boeing’s purchase of Embraer’s commercial jet division.

Embraer’s military jet unit had been a major sticking point for Brazil’s government. So a full Embraer takeover reportedly was off the table early on.

Boeing is interested in Embraer’s engineering expertise as it considers building a new middle-of-the-market plane that can better compete against Airbus’ A320neo jet. Analysts have dubbed this mooted jet the “797.”

The Dow Jones aerospace giant also faces increased narrow-body competition via the new Bombardier (BDRBF) C Series line. In October 2018 Boeing rival Airbus bought a majority stake in the C Series business.

Boeing Stock Climbs

Boeing stock rose 1% to close at 375.70 on the stock market today. Shares fell below a 369.79 entry on Wednesday, but found support at the 200-day line. Boeing stock rose back above the cup-with-handle entry on Thursday. That cup base is within a larger consolidation with a 446.11 entry.

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MarketSmith analysis shows the relative strength line, which tracks Boeing stock vs. the S&P 500 index, has been hitting multimonth highs recently. Boeing stock has a mediocre IBD Composite Rating of 66.

Meanwhile, Airbus stock retreated 1.3%, and Embraer stock edged down 0.5%.


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