Boeing (BA:NYE), the prominent U.S. planemaker, is reportedly engaged in discussions with Riyadh Air, a startup airline, regarding the potential sale of at least 150 of its 737 Max jetliners. This potential deal, if finalized, would mark Boeing’s second major agreement in Saudi Arabia this year. The expansion opportunities in Gulf markets appear promising for Boeing, with the potential for further growth and collaboration. In this post, we delve into the details of the reported discussions and the potential impact on Boeing’s presence in the region.
Boeing’s Talks with Riyadh Air:
According to Bloomberg, Boeing is in talks with Riyadh Air, owned by Saudi Arabia’s Public Investment Fund, for the sale of a significant number of 737 Max jetliners. Riyadh Air is reportedly considering the purchase of approximately 300 to 400 single-aisle jets, with Airbus SE also in the running for a portion of the order. An official announcement about the potential deal could be made at the upcoming Paris Air Show in mid-June.
Expanding in the Gulf Market:
Securing this potential deal with Riyadh Air would enable Boeing to further expand its presence in the Gulf market, which is poised for rapid growth. Earlier this year, Boeing secured an order from Riyadh Air for 39 787-9 Dreamliners, with an option to purchase an additional 33 aircraft. This agreement was part of Saudi Arabia’s efforts, led by Crown Prince Mohammed Bin Salman, to bolster tourism and reduce dependence on oil.
Gulf Growth Prospects:
Saudi Arabia has ambitious plans to serve 330 million passengers and attract 100 million visitors annually by 2030. Riyadh Air, led by industry veteran Tony Douglas, aims to connect over 100 destinations worldwide by the same year. The potential agreement with Riyadh Air aligns with these growth aspirations and positions Boeing to be a key player in supporting Saudi Arabia’s expanding aviation industry.
Recent Developments and Outlook:
Boeing recently resolved a production defect in the fuselage of its 737 Max, allowing the company to resume deliveries. Despite ongoing supply chain challenges in its defense business, Boeing remains confident in its delivery projections, targeting around 30 737s per month in the first half of the year and 40 per month in the second half. The company maintains its outlook, although it acknowledges some pressure on the upper end of its 2023 free cash flow guidance due to supply chain issues.
Investor Sentiment and Future Potential:
On Wall Street, Boeing garners a Buy consensus analyst rating, with 10 Buy and five Hold recommendations from analysts. The average price target of $238.40 implies a potential upside of 17.1% from the current levels. Year-to-date, Boeing shares have advanced approximately 7%.
Conclusion:
Boeing’s ongoing discussions with Riyadh Air for the sale of 737 Max jetliners demonstrate the company’s focus on expanding in the Gulf markets. A potential agreement with Riyadh Air would further solidify Boeing’s presence in Saudi Arabia and contribute to the nation’s ambitious plans for tourism and air travel growth.
With cautious optimism from Wall Street analysts and positive year-to-date performance, Boeing continues to be an intriguing stock for investors to watch as it explores new opportunities and navigates ongoing challenges in the aviation industry.
