Rewarding Qantas and punishing Boeing

Boeing 787 dreamliner.jpg

It is a sign of the times when Qantas’ share price moves up after the airline announces that it will cancel orders for 15 Boeing 787 dreamliners and defer the delivery of another 15.

Normally, the announcement would have been met with dismay. The 787 is meant to replace older Boeing 767 aircraft, and it would have helped to increase Qantas’ revenues after coming into service by giving the carrier more range and capacity while lowering fuel costs.

But the airline is struggling to manage its balance sheet and preserve cash in these dire economic times. Cutting capital expenditure, therefore, is good news now and the shareholders are rewarding the airline for that.

On the other hand, what are the bets on the direction for Boeing shares when the US markets open tonight? The news could not have come for a worse time after the company delayed the first flight of the 787 once again earlier this week. It will add pressure on the company to get the programme on trackbefore someone uses the delays as a reason to cancel their orders.

The Qantas decision is due more to the airline’s financial situation, but this is bad publicity for the airframer any way we look at it. Boeing’s shareholders are unlikely to be as optimistic.

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