On Tuesday, it was announced that Deutsche Lufthansa (DLAKY) will buy up to 100 737 MAX jets, representing its first Boeing (NYSE:BA) single-aisle order in nearly 30 years.
Lufthansa ordered 40 737 MAX-8s (plus 60 options) and 40 A220-300s (plus 20 options). "It is a good strategic decision for the Lufthansa Group to order Boeing 737 aircraft again for the first time since 1995," said Carsten Spohr, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG (OTC:DLAKY). "Around 60 years ago, Lufthansa was co-developer and launch customer of this globally successful model."
Following the news, analysts at Jefferies explained that Lufthansa is expanding its short- and medium-haul aircraft order book to 280 aircraft plus 120 options (including 40 A320 options as part of this deal).
"The deal is valued at ~$9BB at list prices, accelerating Lufthansa Group's fleet modernization in expanding its total order book to 280 firm orders plus 120 options. Deliveries are expected between 2026 and 2032, with the first A220 to City Airlines in 2026 and the first MAX-8 in Q1:27. The Group had phased out its final 737s in 2016," said Jefferies, which has a Buy rating and $315 price target on Boeing.
"The 737 program is set to generate $28BB in revs in 2024, growing to $29BB by 2025 or 30% of BA sales," they added. "We est the FCF associated w/ the 737 is $5.1BB in 2024 ($9.4MM per aircraft or an 18% margin), growing to $5.6BB by 2025 ($10MM per aircraft) and potentially doubling by 2026 as inventoried aircraft are delivered."