Allegiant Air is poised to order 50 Boeing 737 MAX jets worth $5 billion at list prices, people familiar with the matter said, rejecting offers by traditional supplier Airbus as the no-frills carrier seeks to capture a boom in post-pandemic U.S. tourism.
The surprise deal stems from a series of setbacks for Boeing Co (BA.N) and overturns the airline's previous strategy of picking up second-hand jets at bargain prices, which had helped it accumulate over 100 jets built by Boeing's European rival.
The switch of suppliers is the third such airline defection in as many weeks, this time working in Boeing's favor after the U.S. planemaker lost hard-fought medium-haul contests to Airbus (AIR.PA) at Dutch KLM(AIRF.PA) and Australia's Qantas(QAN.AX).
Such "flips" are rare due to the cost of retraining pilots but reflect fierce competition for new business as the aerospace industry seeks to recover from its worst-ever recession.
The deal is the latest sign of accelerated growth among "ultra-low-cost" carriers that combine rock-bottom fares with optional charges. Carriers like these are expected to emerge in a position of relative strength from the COVID-19 pandemic.
"The leisure market is coming back in droves relative to the business market," said one of the people familiar with Allegiant's plans.
Order Race
The Las Vegas-based carrier operates a total of 122 A319 or A320 jets, only 13 of which were ordered directly from Airbus, according to European data. The 737 MAX planes will help Allegiant's growth strategy and replace ageing aircraft over the coming years, though it will continue to be an Airbus operator.
The order comes after a contest waged at least partially between the 737 MAX 7 and the Airbus A220, two of the people said, though some larger 8200 variants may also be involved.
"This is huge. Allegiant was in line to order the A220," Leeham Co analyst Scott Hamilton said, adding that the outcome suggested Allegiant had received a "screaming deal" from Boeing as well as the ability to get deliveries more quickly. The new Boeing planes would replace retired jets and feed Allegiant's growth plans over the coming years.
Mexico's Viva Aerobus in December announced a commercial alliance with Allegiant to offer flights between the United States and Mexico. The deal, which is likely to be counted in December's orders for Boeing, caps a tight annual order race with Airbus.
Boeing bounced back from a safety crisis to sell some 700 MAX through end-November, only to lose two of the industry's most widely watched contests to rival Airbus at Qantas and various subsidiaries of Franco-Dutch group Air France-KLM. Both plane makers are due to publish 2021 data next week.
SOURCE: REUTERS
IMAGE SOURCE:simplyflying.com
