The logistics giant is buying 15 of the aircraft maker's 777 Freighter planes -- and canceling a big order from Airbus
Memphis-based FedEx Express, a unit of FedEx Corp. (FDX) said Nov. 7 that it's switching from Airbus to buy at least 15 new aircraft from Boeing (BA), triggering a rally in shares of the aerospace giant.
After Airbus delayed its delivery of the A380, FedEx cancelled its order for 10 and switched to the new deal with Boeing. Now FedEx is buying 15 new Boeing 777 Freighter aircraft with options for an additional 15.
"Global demand for air cargo and express services continues to grow rapidly and FedEx has made significant investments in our network to meet customers' needs and fulfill our business objectives," said FedEx CEO Frederick W. Smith in a press release.
The Boeing 777 Freighter is the world's largest twin-engine cargo aircraft. FedEx is planning to use the plane to fly between Asia, Europe and the U.S., starting with four aircraft in 2009, eight in 2010 and the remaining three in 2011.
Boeing shares gained 5.1% to $84.59 per share in afternoon trading on the New York Stock Exchange. FedEx edged up 0.6% to $114.57 per share.
"Although we do not see this as a sign FedEx, or other air carriers, are abandoning Airbus, we do see it as evidence of Airbus's failing execution on the A380," Standard & Poor's Corp. analyst Richard Tortoriello said in a research note.
Given the well-publicized A380 delays , Tortoriello continues expecting Boeing to get another 777 and 747 orders over the short term and keeps a buy rating, and a 12-month target price of $106 on the stock. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)
Airbus has been struggling to deliver on its promises to A380 customers, amid challenges such as problems with its cable installation and other mishaps (see BusinessWeek.com, 10/24/06, "The A380 Crisis: What Now for Airbus?"). In a recent example on Oct. 3, the company warned customers of a further delay in the schedule of the A380 and the first one would be delivered in Oct. 2007.
