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Bull Trader USA

Boeing Loses Qantas Business to Airbus. But There’s Good News, Too.

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Travelers wait to verify their Covid-19 vaccination status as they check in for a Quantas flight from Los Angeles to Sydney on Nov. 1.
Patrick T. Fallon/AFP/Getty Images

Australia’s Qantas Airways selected Airbus as the “preferred aircraft” for its domestic business–a small loss for Boeing following two difficult years for the American aerospace giant. Still, the announcement isn’t all bad news for Boeing.

Thursday morning, shares of Boeing (ticker: BA) were up 0.8% in premarket trading, while Airbus (AIR.France) stock had gained 3.3% overseas. Futures on the S&P 500 and Dow Jones Industrial Average futures rose 0.8% and 0.7%, respectively.

Qantas (QAN.Australia) is planning to purchase about 130 A320 and A220 aircraft over the coming 10 years. Today, Qantas operates Boeing 737 and 717 jets. Those are the models that will be phased out in favor of the comparable Airbus models. Qantas also operates Airbus A330 and A380 jets as well as Boeing 787 jets, but the twin-aisle 787 planes aren’t affected by the A320 and A220 order.

“This is a clear sign of our confidence in the future and we’ve locked in pricing just ahead of what’s likely to be a big uptick in demand for next-generation narrow-body aircraft,” said Qantas CEO Alan Joyce in the company’s news release. “That’s good news for our customers, our people and our shareholders.”

His statement is good news for Boeing. Higher pricing and increased demand for new, more fuel-efficient aircraft will help the U.S. aerospace firm as well as Airbus.

And Boeing investors can use some good news. Boeing stock is down about 9% year to date, trailing far behind the gains of the broader market. Airbus stock is up about 15% year to date.

Boeing has been battered by Covid, but also by problems with 737 MAX and 787 jets. Investors are waiting for China to reapprove the MAX for commercial service following its worldwide grounding back in March 2019, following two deadly crashes. And 787 deliveries have been paused after Boeing discovered some quality problems. The 787 problems haven’t led to in-flight issues.

Boeing “faces no shortage of challenges but we see potential to make progress in 2022,” wrote J.P. Morgan analyst Seth Seifman in a research report Wednesday. He sees the company gaining momentum in the coming year, including more 737 MAX deliveries and a resumption of 787 deliveries, which should translate into a higher stock price. He rates the stock at Buy and has a target of $270 for the price.

Shares closed Wednesday at $195.43.

Overall, more than 70% of analysts covering Boeing rate the shares at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Boeing shares is about $263, not too far from Seifman’s target and well above the current level.

Write to Al Root at allen.root@dowjones.com

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