(Reuters) -IAG (LON:ICAG), which owns British Airways, said Thursday that it has agreed to order 50 Boeing (NYSE:BA) 737 MAX jets for delivery between 2023 and 2027. This is a vote of confidence in the struggling U.S. planemaker.
At list prices, the order for 25 737-8-200 and 25 737 MAX 10 jets that will be used for short-haul flights by IAG-owned airlines is worth $6.25 billion. However, the company said it had negotiated a large discount, which is common in the industry.
In addition to British Airways, IAG owns Ireland’s Aer Lingus, Spain’s Iberia and Vueling, and Italy’s Alitalia. As part of the deal, shareholders must agree to let IAG buy the other 100 shares.
IAG CEO Luis Gallego said in a statement, “The addition of new Boeing 737s is an important part of IAG’s short-haul fleet renewal.”
The deal isn’t as big as a non-binding commitment for 200 737 MAX jets that former CEO Willie Walsh made at the 2019 Paris Airshow. The commitment was a lifeline for Boeing when the model was grounded after two fatal crashes.
But the firm order for a 737 MAX 10 from a top customer sends an important message to the market at a time when Boeing is fighting a high-stakes battle to get the largest MAX variant certified before a new safety standard for cockpit alerts goes into effect at the end of the year.
Analysts and company executives have said that Boeing’s financial health depends on getting back to delivering 787 Dreamliners and getting rid of its stock of MAX planes.
Reuters said in February that IAG was likely to place a smaller version of its 2019 commitment, with about 50 jets instead of the original 200.
IAG’s Chief Financial Officer at the time, Steve Gunning, told analysts in November that the airline group would need more short-haul planes by 2024 or 2025, and he hinted that the 737 MAX would be part of any order.