Boeing (BA) Slumps as Qantas Cancels Huge 787 Dreamliner Order
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Boeing (NYSE: BA) shares are indicated lower Thursday morning amid news that one of its larger 787 Dreamliner orders is being put on hiatus.
Earlier, Australia's Qantas Airways reported its first full-year loss in 17 years, totaling A$244 million for the 12-months ended June 30th. The loss, bolstered by higher fuel costs, labor unions, and increasing competition, caused the airliner to cancel an $8.5 billion order with Boeing for about 35 787-9 Dreamliners.
Qantas CEO Alan Joyce said the cancellation would significantly reduce Qantas' forward capital expenditure commitments. Joyce noted that flexibility on Qantas' balance sheet has become tight and there weren't many options left to conserve capital.
Amid the cancellation, options and purchase rights for 50 Boeing 787-9s would be brought forwared two years to 2016, meaning there will be a two year delay on the first delivery.
Delivery on 15 787-8s -- the smaller variant of the 787-9 -- will still continue for Qantas' Jetstar subsidiary.
Boeing hasn't issued a statement on how the cancellation will affect results moving forward.
Wells Fargo commented on the developments today, saying any cancellations are a negative for the commercial aerospace cycle. The firm noted: "...investors should recognize that at the end of July, Boeing had 505 7878 firm orders and 339 7879 firm orders for a total of 844 airplanes. At a delivery rate of about 120 in 2014, it will take years to work through those firm orders (even without considering options exercises) and so this one cancellation would not derail any earnings or cash flow estimates for Boeing or the suppliers."
Shares of Boeing are down about 0.6 percent in early trading.
Earlier, Australia's Qantas Airways reported its first full-year loss in 17 years, totaling A$244 million for the 12-months ended June 30th. The loss, bolstered by higher fuel costs, labor unions, and increasing competition, caused the airliner to cancel an $8.5 billion order with Boeing for about 35 787-9 Dreamliners.
Qantas CEO Alan Joyce said the cancellation would significantly reduce Qantas' forward capital expenditure commitments. Joyce noted that flexibility on Qantas' balance sheet has become tight and there weren't many options left to conserve capital.
Amid the cancellation, options and purchase rights for 50 Boeing 787-9s would be brought forwared two years to 2016, meaning there will be a two year delay on the first delivery.
Delivery on 15 787-8s -- the smaller variant of the 787-9 -- will still continue for Qantas' Jetstar subsidiary.
Boeing hasn't issued a statement on how the cancellation will affect results moving forward.
Wells Fargo commented on the developments today, saying any cancellations are a negative for the commercial aerospace cycle. The firm noted: "...investors should recognize that at the end of July, Boeing had 505 7878 firm orders and 339 7879 firm orders for a total of 844 airplanes. At a delivery rate of about 120 in 2014, it will take years to work through those firm orders (even without considering options exercises) and so this one cancellation would not derail any earnings or cash flow estimates for Boeing or the suppliers."
Shares of Boeing are down about 0.6 percent in early trading.
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