The stock of Boeing Co (NYSE: BA) declined yesterday after negotiations with Ryanair for the sale of 737 MAX 10 aircraft worth several billions of dollars failed due to disagreement over price. Notably, the Irish airliner chose to publicize details about the failed discussion after the previous bargaining led to a postponement of the contract for the biggest model of the 737 MAX and placing of an order for a smaller variant in December 2020. The stock closed at $214.24, down $3.93 or 1.80% from the prior close.
The aforesaid big order from Ryanair would immensely lift the Chicago, Illinois-based aircraft manufacturer, which is working strenuously to reinstate confidence in the 737 Max, which remained ground for about one-and-a-half years (November 2020) following the two deadly crashes that resulted in the loss of 346 lives. A successful deal could have expedited the industry’s rebound from the jolt caused by the COVID-19 pandemic.
Interestingly, Ryanair, the number one budget carrier in Europe, is the largest client of MAX jets in the region. It has already placed an order for the 210 MAX-8-200 jets, which has a seating capacity of 197 passengers. The airliner is also interested in placing a new order, valued at about $33 billion, for 250 of the 230-seater MAX-10 model aircraft. The contract would be worth more than $10 billion even after discounts, which are common in the industry.
However, Ryanair Group CEO Michael O’Leary issued an adverse opinion last week, stating that he would be amazed if an agreement was reached before the end of 2021.
This week, the CEO plainly stated that the deal had failed. He also revealed that Boeing is quoting a higher price, relative to Ryanair’s expectation, and that the latter has a track record of shying away from costly deals.
Boeing, however, issued a polished statement stating that Ryanair is a long-term client and the aircraft manufacturer values their decisions. At the same time, Boeing spokesperson pointed out that the company is willing to sell at prices that add value to the company.
Analysts believe that Ryanair is trying to pressurize Boeing as the latter needs big orders for MAX jets to rise above the crisis that followed the air crash and the uncertainty caused by the COVID-19 pandemic.
Boeing, nevertheless, seems to believe that the airline industry is on the verge of taking off. The company had recently received orders for 150 MAX 10 from United Airlines.
As Ryanair and Southwest dominate the budget flying market, experts believe that they will demand highly competitive prices from Boeing.
Notably, Rob Morris, Ascend by Cirium’s chief consultant, has pointed out that the price of MAX jets is on the rise as inventory is on a decline. Even though MAX 10 is yet to enter service, the price of lower variant MAX 9 has increased by 2% in recent times, but is still 9% to 10% below pre-crisis levels.
The failure of the large contract negotiation is expected to keep the stock of Boeing weak for the next few days.
The historical price chart indicates that the stock has closed below its 50-day moving average. Additionally, the stochastics oscillator is on the verge of entering the bearish zone. Therefore, we are anticipating the stock to remain in a downtrend in the short term. The next major support is anticipated near 200.
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