Atlanta: Boeing Co tumbled the most in almost a year after Delta Air Lines Inc Chief Executive Richard Anderson said there was a surge of wide-body models coming off lease, creating investor concern the plane maker faces pressure on pricing for new aircraft.
The used-jet glut may hurt prices of the 777 jetliner, one of Boeing’s largest sources of profit, said George Ferguson, senior air transport analyst with Bloomberg Industries. Boeing may also find it tougher to generate new sales needed to keep output at a 10-jet per month rate as it transitions to an upgraded model known as the 777X, he said.
Risk
The situation is “causing concerns about new model pricing,” Ferguson said in an email. The issues also heighten “the risk that Boeing has to cut 777 production rates very soon, even late next year.”
Boeing fell 4.3 per cent to $134.22 at the close in New York, its biggest plunge since Oct. 22, 2014. The decline was the second-largest among the 30 members of the Dow Jones Industrial Average.
“The aircraft market is going to be ripe for Delta over the course of the next 12 to 36 months,” Anderson said on a conference call Wednesday after the airline’s third-quarter earnings report. “Prices are going to get lower.”
The 777 is estimated to account for 30 per cent of total Boeing segment earnings before taxes, with perhaps the best-selling 737 jetliner “the only larger contributor,” Noah Poponak, a New York-based analyst with Goldman Sachs, said in a note Tuesday.
