Delta’s Ultra-Cheap Used 777 Hits Boeing’s Stock Hard

Boeing Co. shares dipped Thursday after Delta Air Lines Inc. revealed it is purchasing a used 777 jetliner for $7.7 million, reviving concerns that plunging values for some wide-body models might signal that their market has peaked.

Delta Chief Executive Officer Richard Anderson has sparred with the planemaker, analysts and lessors over the values for decade-old 777-200 family jets, a version of Boeing’s best- selling twin-aisle model. Anderson said in October that Delta had been offered the jets for as little as $10 million, later adding that the proposal came from Boeing.

“I was wrong when I said used 777s were on market for $10M,” Delta posted in a tweet Thursday, quoting a comment by Anderson at a presentation to investors in New York. “It was actually $7.7M. We just signed a letter of intent to buy one.” The airline didn’t name the would-be seller and didn’t immediately return a request for details.

Boeing shares immediately fell on the news, declining 1.2 percent to $146.29 at 12:54 p.m. in New York and wiping out earlier gains. The stock was up as much as 1.1 percent earlier in the session after Boeing landed a $10 billion aircraft order from Asia’s largest carrier. Doug Alder, a spokesman for the planemaker, didn’t immediately return a request for comment.

Low Ball

Following Anderson’s initial comments in October, Boeing CEO Dennis Muilenburg suggested that the price tag was off-base. New 777-200ERs sold for $170 million 10 years ago. Factory-fresh versions currently list for $277.3 million, though discounts are customary in the industry.

“That number is the wrong order of magnitude,” Muilenburg said at the time, adding that the plane’s value was holding up well. “In that 365-seat category, there is no competing aircraft out there.”

While prices are stronger for the largest 777 model, the -300ER, they’ve plunged to as little as $35 million for older -200ER variants with used Rolls Royce engines and little value on the second-hand parts market, David Perry, an analyst at JP Morgan Securities, wrote in a Dec. 2 report. Most airlines want new plans to take advantage of better financing options, improved fuel economy and lower maintenance costs, he said.

“Our key takeaway is that the weak used B777 market is getting weaker, and this weakness is spreading” across the broader wide-body, Perry said.

This article was written by Julie Johnsson and Michael Sasso from Bloomberg and was legally licensed through the NewsCred publisher network.