The Story:
Airbus and Boeing struck nearly $77 billion worth of deals at the Dubai Airshow as discount carriers rushed to take advantage of discounts and lock in the cost of their aircraft procurements.
The Nuts and Bolts:
Boeing, the U.S. aerospace company, said that FlyDubai of the United Arab Emirates has agreed to buy 175 of its 737 Max planes, along with rights to buy another 50. The 225-aircraft deal, which was worth around $27 billion, was the biggest ever order from the Middle East for single-aisle passenger planes, the company said.
Boeing’s European rival Airbus was not far behind, as the company announced that it had reached a deal to sell 430 A320neo family of jetliners to Indigo Partners, a U.S.-based private-equity group which has stakes in low-cost carriers Frontier Airlines, Mexico’s Volaris, Chilean carrier JetSmart and Hungary’s Wizz Air.
Airbus’s preliminary deal was expected to be worth up to $50 billion, but the price could come further down by the time both parties agree to finalize the nuts and bolts of the deal.
Why are the deals so big?
As we can clearly see, most of the big-ticket orders were from budget airlines, also known as low-cost carriers, that seek volume and operate with tiny margins. So, it’s not a surprise to see them ordering in bulk and cutting the overall price, as well as the net price of each plane they buy for their fleets.
As with any low-margin business, the lower the acquisition cost, the faster the money can be recouped. That’s why the deals here are mostly multi-billion dollar newsworthy ones.
==========
Hey, thanks for visiting! We’re just a small team working extra-hard to help you cut to the chase on the most important news from around the world, so we’d appreciate your help spreading the word. Come join us on: Facebook and Twitter
