50% Off! Beat the market in 2025 with InvestingProCLAIM SALE

Exclusive-U.S. carrier Allegiant Air to buy 50 Boeing 737 MAX jets -sources

Published 01/04/2022, 04:02 PM
Updated 01/04/2022, 07:35 PM
© Reuters. FILE PHOTO: The first Boeing 737 MAX 7 is unveiled in Renton, Washington, U.S. February 5, 2018. REUTERS/Jason Redmond/File Photo
BA
-

By Eric M. Johnson and Tim Hepher

SEATTLE/PARIS (Reuters) -Allegiant Air is poised to order 50 Boeing (NYSE:BA) 737 MAX jets worth $5 billion at list prices, people familiar with the matter said, rejecting offers by traditional supplier Airbus as the no-frills carrier seeks to capture a boom in post-pandemic U.S. tourism.

The surprise deal stems a series of setbacks for Boeing Co and overturns the airline's previous strategy of picking up second-hand jets at bargain prices, which had helped it accumulate over 100 jets built by Boeing's European rival.

The switch of suppliers is the third such airline defection in as many weeks, this time working in Boeing's favor after the U.S. planemaker lost hard-fought medium-haul contests to Airbus at Dutch KLM https://www.reuters.com/business/aerospace-defense/airbus-wins-dominant-share-air-france-klm-jet-purchase-sources-2021-12-16 and Australia's Qantas https://www.reuters.com/business/aerospace-defense/airbus-wins-order-renew-qantas-fleet-sources-2021-12-15.

Such "flips" are rare due to the cost of retraining pilots, but reflect fierce competition for new business as the aerospace industry seeks to recover from its worst-ever recession.

Boeing, Airbus and Allegiant Air, a unit of Allegiant Travel Co, all declined to comment.

The deal is the latest sign of accelerated growth among "ultra-low-cost" carriers that combine rock-bottom fares with optional charges. Carriers like these are expected to emerge in a position of relative strength from the COVID-19 pandemic.

"The leisure market is coming back in droves relative to the business market," said one of the people familiar with Allegiant's plans.

ORDER RACE

The Las Vegas-based carrier operates a total of 122 A319 or A320 jets, only 13 of which were ordered directly from Airbus, according to European data.

The 737 MAX planes will help Allegiant's growth strategy and replace aging aircraft over the coming years, though it will continue to be an Airbus operator.

The order comes after a contest waged at least partially between the 737 MAX 7 and the Airbus A220, two of the people said, though some larger 8200 variants may also be involved.

"This is huge. Allegiant was in line to order the A220," Leeham Co analyst Scott Hamilton said, adding that the outcome suggested Allegiant had received a "screaming deal" from Boeing as well as the ability to get deliveries more quickly.

The new Boeing planes would replace retired jets and feed Allegiant's growth plans over the coming years.

Mexico's Viva Aerobus in December announced a commercial alliance with Allegiant to offer flights between the United States and Mexico.

The deal, which is likely to be counted in December's orders for Boeing, caps a tight annual order race with Airbus.

© Reuters. FILE PHOTO: The first Boeing 737 MAX 7 is unveiled in Renton, Washington, U.S. February 5, 2018. REUTERS/Jason Redmond/File Photo

Boeing bounced back from a safety crisis to sell some 700 MAX through end-November, only to lose two of the industry's most widely watched contests to rival Airbus at Qantas and various subsidiaries of Franco-Dutch group Air France-KLM.

Both planemakers are due to publish 2021 data next week.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.