Boeing Bags Order of up to 100 737 MAX Jets from Allegiant

The world’s largest aerospace company Boeing (NYSE: BA) has inked an agreement with Allegiant Travel Company (NASDAQ: ALGT), an American ultra-low-cost airline, to purchase 50 new 737 MAX aircraft to modernize and expand its fleet. The deal includes an option for Allegiant to purchase 50 additional aircraft in the future.

Boeing will deliver an initial group of planes in 2023, with the remaining deliveries scheduled throughout 2024 and 2025.

Allegiant CEO Maurice J. Gallagher, Jr. said, “While the heart of our strategy continues to center on previously-owned aircraft, the infusion of up to 100 direct-from-the-manufacturer 737s will bring numerous benefits for the future – including flexibility for capacity growth and aircraft retirements, significant environmental benefits, and modern configuration and cabin features our customers will appreciate.”

Terms of the Deal

The multi-year deal is Boeing’s first U.S. ultra-low-cost carrier (ULCC) deal and includes the sale of the 737-7 and 737-8-200 models. With a low operating cost structure, the 737-7 enables carriers to open new routes with less economic risk, while the larger 737-8-200 is an optimal product for ULCC market expansion with revenue-generating potential.

Markedly, the 737 MAX’s superior efficiency, flexibility, and reliability, along with a 20% reduction in fuel use and carbon emissions compared to Allegiant’s current fleet, make it a viable product. To accelerate operational efficiency, a suite of Boeing Global Services digital tools will also be used by Allegiant.

Official Comments

CEO of Boeing commercial airplanes, Stan Deal, said, “We are thrilled that Allegiant has selected Boeing and the 737 MAX as they position themselves for future growth, improved efficiency and operational cost performance. This deal further validates the economics of the 737 MAX family in the ULCC market and we’re excited to stand alongside Allegiant as they integrate these new airplanes into their fleet.”

Wall Street’s Take

Recently, Jefferies analyst Sheila Kahyaoglu reiterated a Buy rating and a price target of $300 (40.8% upside potential) on Boeing.

Consensus among analysts is a Strong Buy based on 13 Buys versus 2 Holds. The average Boeing price target of $272.46 implies 27.87% upside potential. However, shares have decreased 10% over the past six months.

Boeing has scheduled the release of its upcoming earnings report for the fourth quarter of 2021 for January 26, 2022.

Investors

TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on Boeing, with 1.3% of investors maintaining portfolios on TipRanks increasing their exposure to BA stock over the past 30 days.

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