U.S. planemaker Boeing (NYSE:BA) is in talks with startup Riyadh Air for the sale of at least 150 737 Max jetliners, Bloomberg reported. If the deal goes through, it will mark the second major deal for Boeing in Saudi Arabia this year. Boeing’s options for expansion in the gulf markets could be limitless.
Riyadh Air, owned by Saudi Arabia’s Public Investment Fund, reportedly intends to purchase about 300 to 400 single-aisle jets. Airbus SE (EADSY) might also grab a part of the order. An announcement about the deal could be made at the Paris Air Show to be held in mid-June.
Growth Prospects in Gulf
If Boeing wins this second major deal with Riyadh Air, it will help it in expanding in the key Gulf market, which is expected to grow rapidly. Earlier this year, Boeing won an order from Riyadh Air for 39 787-9 Dreamliners, with an option to buy an additional 33 787-9s. The deal was part of Saudi Arabia’s Crown Prince Mohammed Bin Salman’s plan to expand tourism in the kingdom and reduce its dependence on oil.
Saudi Arabia aims to serve 330 million passengers and attract 100 million visitors annually by 2030. Riyadh Air is run by industry veteran and former Etihad Aviation Group head Tony Douglas. Its goal is to connect more than 100 destinations around the world by 2030.
Last week, Boeing confirmed that it had resumed deliveries of its 737 Max after addressing the production defect in its fuselage. Boeing was forced to suspend deliveries of some of its 737s after supplier Spirit AeroSystems (NYSE:SPR) notified the company of a manufacturing defect related to fuselages.
Speaking at the Wolfe Research 16th Annual Global Transportation & Industrials Conference held last week, Boeing CFO Brian West said that the company continues to expect to deliver about 30 737s per month in the first half of the year and 40 per month in the second half. However, West cautioned that the upper end of its 2023 free cash flow guidance of $3 billion to $5 billion was a “bit pressured” due to the ongoing supply chain issues in its defense business. Nonetheless, the company is maintaining its outlook.
Is Boeing a Good Stock to Buy?
Wall Street is cautiously optimistic on Boeing stock, with a Moderate Buy consensus rating based on 10 Buys and five Holds. The average price target of $238.40 suggests 17.1% upside. Shares have advanced about 7% year-to-date.