Why Boeing Stock Is Gaining Today

What happened

Boeing (NYSE: BA) has secured a new customer for its 737 MAX, a big boost to the aerospace giant's most important commercial product. Shares of Boeing are up more than 5% on Thursday after Boeing announced a 12-plane deal with Japan's Skymark Airlines.

So what

Boeing's 737 MAX was once expected to be among the top-selling airframes in commercial aviation history, but that momentum was derailed by a pair of fatal accidents that led the plane to be grounded for 18 months. The MAX is flying again throughout most of the world, but Boeing still has work to do to rebuild confidence in its brand and get metal moving again.

On Thursday, the company announced that Skymark, Japan's third-largest airline, plans to acquire up to a dozen 737 MAX planes as part of the airline's fleet modernization effort. The carrier intends to buy an initial four planes with options for two more and to also lease six 737 MAXs from other owners.

The order isn't a complete surprise, as Skymark throughout its 26-year history has been an all-Boeing operator. The airline currently operates a fleet of 29 previous-generation 737s, meaning the MAX was a natural replacement.

Still, given the turbulent few years Boeing has had, and rival Airbus' success winning new business during the period, the order is a positive step for the 737 MAX program.

Separately, Boeing also announced that Azerbaijani cargo carrier Silk Way West Airlines plans to buy two 777-8 freighters.

Now what

A 12-plane order is not going to solve all of Boeing's problems, including a balance sheet bloated with debt and continued issues selling in China due to geopolitical tensions. But it is a step in the right direction and a sign that Boeing's most loyal customers are not looking elsewhere.

What Boeing really needs is a healthy global economy in the years to come, with robust demand for air travel fueling demand for new jets. The broader market's Thursday rally on signs the Federal Reserve's effort to fight inflation are working, and thus suggesting an end to a rate-hike cycle might be close, is an added boost to Boeing shares.

Alas, Boeing still has a lot of work to do to get back to business as normal, and despite the positive inflation headlines, there is still a lot of uncertainty about the macro environment. Boeing shareholders should celebrate the positive developments but understand there is still the potential for a lot of volatility up ahead.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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