It's a macroeconomic headwind that could produce a jetliner order headwind.

International Lease Finance Corp. said it may order 300 jetliners from Boeing and Airbus to meet lease demand from airlines that can no longer afford to buy their own planes, Bloomberg News reported Wednesday.

International Lease said it may purchase 150 single-aisle aircraft from each aerospace company. The orders would be worth about $22 billion at current plane prices, exclusive of discounts.

Boeing (NYSE: BA) shares fell $4.83 to $69.99 on the news, while Airbus's parent EADS' shares rose 39 euro cents to €12.95 in afternoon trading in Paris.

High oil prices take a toll

Stock analyst C. Leonard Bauer told BloggingStocks Wednesday the era's record-high jet fuel prices are beginning to take a toll on airline business models. "If high prices, basically oil above $120 a barrel, persist, you will see order cancellations, and more postponements, in the U.S. and abroad," Bauer said. "Some airline business models just won't work with oil at $120-$125 or higher, so you will begin to see order delays and cancellations." Bauer added that he does not have ratings on, nor own shares in any airline or airline manufacturer.

Boeing said on Monday its 787 Dreamliner would make its first test flight in Q4 2008, reiterating that it would make its revised test flight date for the next-generation airliner, Reuters reported Tuesday.

First deliveries of the plane were also on schedule for Q3 2009, said Dmitry Krol, Boeing's director of communications in Russia and the Commonwealth of Independent States, Reuters reported.

Boeing's (NYSE: BA) shares rose 53 cents to $73.69 in Monday afternoon trading.

Independent stock analyst C. Leonard Bauer told BloggingStocks Monday Boeing's reiteration of the company's first-flight time deadline was not gratuitous.

Airlines have been complaining that late deliveries of planes from Boeing (NYSE: BA) and Airbus are hurting their business. They wanted bigger new plans to expand routes and add to fuel-efficiency.

Now, many of the passengers are gone and airlines are cutting their fleets. According to The Wall Street Journal, "For the industry, it's great that the 787 and the A380 are late because it means less capacity," said Robert Milton, head of Canada's largest airline. Perhaps the two airplane manufacturers will never deliver their new planes at all. No such luck.

What are the airlines to do now? They still have huge orders in for the new aircraft, planes that they may not be able to use effectively for years. As long as the airlines are operating as normal businesses, they have obligations to take delivery of the products.

The whole matter may be another argument for why some large US carriers may opt for Chapter 11. With fuel prices continuing to move up and no drop in sight, making profits may be impossible. Most airlines also carry heavy debt loads on top of their substantial obligations to buy more planes.

Airlines may not be able to cancel orders for new aircrafts, but in a bankruptcy, the contracts with Boeing and Airbus might be dissolved.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

Airbus said 2008 orders for the A380 superjumbo jet may be one-third lower than previously forecast, as higher fuel costs and an economic slowdown moderate travel growth, Bloomberg News reported Wednesday.

Airbus said it may receive about 20 orders in 2008 for the 525-seat A380 superjumbo, the world's largest commercial jetliner. Earlier, Airbus had projected up to 30 orders for the A380 in 2008.

Airbus' announcement did not negatively impact the stock, at least not at the outset. Shares of Airbus' parent EADS gained 28 cents to 14.95 euros in Wednesday afternoon trading on the Paris exchange.

Airbus has again delayed delivery of selected A380 superjumbo jets, saying the company's transition to automated production is behind schedule.

Airbus now expects to deliver 12 A380 planes in 2008, down from 13, and 21 planes in 2009, down from 25, the company announced Tuesday.

Promoted as the world's most economical, large aircraft, the A380 is about two years behind schedule. The A380 will seat 525 passengers in a normal configuration, at least 50-120 seats more than its chief competition, Boeing's (NYSE: BA) 747, the wide-body industry standard.

In Europe, shares of Airbus's parent EADS were virtually unchanged on the news, down just 2 euro cents to 12.72 euros in afternoon trading. Boeing's shares gained five cents to $84.87.

Several leading business journals have reported that China has created its own regional jumbo jet company to compete with Boeing Co (NYSE: BA) and Airbus.

The Financial Times (subscription required) reports, "China has unveiled a state-owned aircraft manufacturer intended to eventually challenge Boeing and Airbus's control of the global market in large airliners." The Times characterizes the Commercial Aircraft Corporation of China (CACC) as "a significant step in Beijing's drive to create an advanced civil aviation manufacturing sector able to help meet the country's rapidly growing demand for regional and larger jets."

Reuters noted that, "many analysts have expressed skepticism about the commercial prospects of a large jet designed and manufactured entirely in China, given the country's limited experience in big aircraft." Not sure what analysts know, I'm skeptical just as much of them.

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Boeing is worth an evaluation.

The Boeing Company (NYSE: BA) is the world's largest aerospace company.

In general, analysts expect 3-5% revenue growth in FY 2008, and 7-10% in FY 2009 as Boeing's increased aircraft production to meet high order backlogs offsets production delays in the 787 Dreamliner.

Moreover, although not to give short-shrift to Boeing's Integrated Defense Systems division, now the world's second-largest military contractor, behind Lockheed Martin (NYSE: LMT), the major driver of BA's future value-added will continue to be its commercial aviation operation, led by the next-generation 787 Dreamliner.

The Boeing (NYSE: BA) 787 Dreamliner has been delayed for a third time and deliveries to airlines may not begin in earnest for a year. The news is bad for Boeing, but it is worse for some of the airline partners who were counting on a fixed schedules for getting the new plane into service. The Dreamliner flies farther, saves more fuel, and carries more passengers than many aircraft in service now.

Several airlines, including Qantas, New Zealand Air, Air India, and All Nippon will all ask for money because of the delays. According to Reuters, "More than 50 airlines are waiting for 892 Boeing 787s, worth a combined $145 billion at list prices."

The news is very tricky for Boeing investors to assess. There is an excellent case that some of the airlines which expected the 787 this year and next have legitimate claims. Some might even argue that they can cancel their orders and buy a competing product from Airbus. The costs to Boeing could stretch into the tens of billions of dollars. But none of the airlines has made public the value of its damage request. Boeing also might elect to counter these claims, perhaps in court. Of course, being involved in a lawsuit with your largest customers is rarely a good idea.

One thing Boeing's shareholders can be sure of is that the mess is going to cost some money, and that usually moves a company's share price down.

Douglas A. McIntyre is an editor at 247wallst.com.

Boeing (NYSE: BA) is thumping its chest about the likelihood that it can get Congress to reverse a deal giving a $35 billion military tanker contract to Northrop Grumman (NYSE:NOC) and EADS, the parent of Airbus.

According to Reuters Mark McGraw, a company vice president, said he was "as confident as I can be" that congressional auditors would find fault with the U.S. Air Force's February 29 choice of the rival team. Brave words, especially when the Air Force claims that the Boeing proposal lost on every key metric for building the tanker.

Boeing is counting on members of Congress who don't want American jobs to go overseas to push back on a contract which includes Europe-based EADS. But, it may not be that simple.

The Wall Street Journal reports that "Government contracting documents show that the U.S. Air Force preferred the size and capability of aerial refueling tankers" being offered by EADS and Northrop. The EADS Airbus 330 can carry more fuel that its Boeing competition.

Boeing is almost certainly wasting its time. No matter how much some Congressmen would like to save jobs for their districts, they cannot be seen as favoring a deal which is probably substantially inferior.

Douglas A. McIntyre is an editor at 247wallst.com.

Boeing Co. (NYSE: BA) filed a formal protest this week against the U.S. Air Force's decision to award its $35 billion contract for refueling tankers to EADS, the parent of Europe's Airbus. The value of the contract could grow to $100 billion over the life of the program, and Boeing is not going to let that money slip away easily.

The decision has generated a lot of political heat in the U.S., as politicians decry the loss of American jobs and American profits. The problem is, though, that the United States loses no matter which firm gets the contract.

If Boeing is given the contract, the U.S. gets lower quality planes in smaller numbers. By all accounts, the Boeing tanker, based on the 767, is smaller and older than the EADS tanker, based on the larger and newer Airbus A330. And EADS promised to deliver more of the planes at an earlier date. As BloggingStocks' Peter Cohan wrote when the decision was made, the choice between the two planes wasn't close on the merits.

On the other hand, if EADS gets the contract, the U.S. loses tens of thousands of high-paying, high-tech defense jobs. Boeing claims the contract would provide over 40,000 jobs. Although EADS claims that it would assemble its planes in the U.S. and provide roughly 20,000 American jobs, it's pretty clear that most of the tanker-related jobs would be in Europe, where most Airbus parts are made.

So it's a lose-lose situation. Either you get jobs, exorbitant corporate profits and inferior planes, or fewer jobs, no (American) profits and superior planes. Usually, our lion-hearted men and women of the U.S. Congress chooses the former course. We'll see if their preference for the latter will survive the growing political storm.

Boeing Co. (NYSE: BA) and Airbus go toe to tor for almost very major commercial airline contract in the world. They haul each other into court over international trade practice questions. For pure blood sport, the competition can hardly be matched.

Over the course of the last week, the battle between the two companies moved up a notch as the Air Force gave a $35 billion tanker program to Northrop Grumman Corp. (NYSE: NOC) and EADS, the parent of Airbus. Members of Congress may try to keep the deal with Boeing, and the issue should be messy for several months.

While Boeing and Airbus beat the living daylights out of one another, China is planning to begin to build its own large commercial aircraft. China is one of the biggest markets for the two airplane company leaders, and as the need of big jets there increases, the Asian company was going to be a meal ticket that might last for decades.

Things are not going as planned. According to The Wall Street Journal (subscription required), "China has confirmed plans to set up a company to make large passenger airplanes." The paper also writes that Boeing thinks China will need over 3,300 new jets by 2026.

China could be making its own planes by then, leaving Boeing and Airbus to bicker over military contracts.

Douglas A. McIntyre is an editor at 247wallst.com.

MAJOR PAPERS:

• Northrop Grumman Corporation (NYSE: NOC) won a $40B contract to turn Airbus jets into "flying gas stations" for U.S. military aircrafts, the Wall Street Journal reported, breaking The Boeing Company's (NYSE: BA) lock on the market.
• Royal Bank of Canada (NYSE: RY) is expected to launch the first covered bond from the country next week, the Financial Times reported. The bank is targeting a benchmark-sized issue worth $1.4B-$4.2B.
• The Financial Times also reported that Indian conglomerate Tata has concluded an agreement with Virgin Mobile USA Inc (NYSE: VM) to launch a cellular phone brand in India. The brand, called Virgin Mobile in India, would target young Indians under a franchise agreement with Tata Teleservices.

WEB SITES:

• Bloomberg reported that former JP Morgan Chase & Co (NYSE: JPM) Vice Chairman Donald Layton is expected to be named E*Trade Financial Corporation's (NASDAQ: ETFC) new CEO. In an interview, Layton said he may consider a sale of the troubled online brokerage if it "made sense" for shareholders.

Despite the hue and cry that American interests were hurt when the U.S. military gave its new tanker order to Northrup Grumman Corp. (NYSE: NOC) and EADS, the parent of Boeing Co. (NYSE: BA) rival Airbus, one big company based in Connecticut did very well. That would be General Electric Co. (NYSE: GE).

According to the Business Courier, "the planes will be powered by GE's CF6 jet engines." Due to the large number of planes involved, GE will build 400 engines and bring in about $5 billion.

The news adds to the economic complexity surrounding the politics of the contract. A number of congressmen believe that a company based in France, EADS, should not be building planes for the U.S. military. Picking Boeing, based in Chicago, would have been a more patriotic decision.

But, the math may not be all that simple. Northrop Grumman is clearly a U.S. company, and GE is getting a huge contract. There is no saying that Boeing might not have used Rolls Royce engines and other significant components from other countries.

The military award may be better for U.S industrial interests than most people think

Douglas A. McIntyre is an editor at 247wallst.com

The New York Times reports that Boeing Co. (NYSE: BA) has lost a $40 billion deal for airborne tankers that refuel fighter jets for the Air Force. The winning suppliers are Northrop Grumman (NYSE: NOC) and EADS, the parent of Boeing's arch rival, Airbus.The deal, which puts a critical United States military contract partially into the hands of a European company, calls for spending up to $40 billion to replace the Air Force's aging aerial tanker fleet of 535 Boeing 707s and DC-10s.

This comes as a major blow to Boeing. Its CEO, James McNerney, had been brought into his position in 2005 to clean up the company after several significant ethics problems -- including a deal to hire the Air Force's second ranked weapons buyer, Darleen A. Druyun, her daughter and son-in-law in return for steering the tanker contract and billions of dollars of other Air Force business to Boeing. Soon after joining Boeing at a $250,000-a-year post, Druyun and Michael Sears, Boeing's former CFO, pleaded guilty in the scandal and received prison terms.

Since I am working on a book on Boeing, I was very focused on this contract award. A win would have been a big benefit to shareholders after McNerney's efforts to cure Boeing of its ethics problems. The loss of this contract -- which could total $100 billion -- is a big setback.

Boeing's stock fell $2.01 during the market today and an additional $2.68 after hours.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

After the market close, the US military announced that it was giving its new tanker refueling contract to Airbus parent EADS and Northrop Grumman Company NYSE: NOC). The market believed that The Boeing Company (NYSE: BA), which has been supplying tankers for years, was a lock to get the deal.

The news is a stunning turnaround for Airbus since its planes will be adapted for military use. A year ago the European airframe company was in real trouble because of product delays. But, the tables have been turned recently. Boeing has been slow getting its new Dreamliner to customers. The plane has been delayed twice.

According to The Wall Street Journal "Under the contract, the Northrop-led team will build up to 179 tankers based on the Airbus A330 jetliner." The deal is valued at $40 billion.

Shares in Boeing are down over 3% after hours and NOC is up 5.7%.

Douglas A. McIntyre is an editor at 247wallst.com.