1st Order for Boeing's New 737 MAX 7

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The Boeing Company (BA) launched the third member of the 737 MAX family, the 737 MAX 7. Concurrently, the company received its first order for the airplane from Southwest Airlines Co. (LUV).

The Dallas-based carrier Southwest Airlines converted its 30 existing orders for Next-Generation 737s into orders for the 737 MAX 7. Meanwhile, by exercising its option it has included five more Next-Generation 737-800s to its fleet.

With the MAX 7 conversions and exercised options for 737-800s, Southwest's unfilled orders consist of 180 737 MAX airplanes and 137 Next-Generation 737s. The 737 MAX now has orders for 1,315 airplanes. The delivery of the first 737 MAX 7 is expected in 2019. The newest range of 737 airplanes from Boeing will help Southwest Airlines in improving fuel efficiency and profitability.

The Boeing 737 is a short- to medium-range twin-engine narrow-body jet airliner. The 737 has developed into a family of nine passenger models with a capacity of 85 to 215 passengers.

The 737 model is the company’s most up-to-date single-aisle jet that features the latest-technology CFM International LEAP-1B engines designed to enhance fuel efficiency, reliability and passenger comfort level. The 737 MAX aircraft is in demand due to its 13% added fuel efficiency and lowest operating costs.

In comparison to the 737-700 airplanes, the 737 MAX 7 will extend the range by approximately 400 nautical miles or 741 kilometer. Moreover, it will emit 286,000 fewer tons of carbon dioxide. While saving 200 million pounds of fuel per year, it will make cost savings of more than $100 million.

The company is continuously receiving orders for 737 airplanes. Recently, Boeing finalized an order worth $6.9 billion with Turkish Airlines for 70 Boeing single-aisle 737 aircrafts. The order involves the purchase of 40 737 MAX 8s, 10 737 MAX 9s and 20 next-generation 737-800 jets. The deal also has options for an additional 25 737 MAX 8s.

Taking into account the increase in demand for its airplanes, the company increased the production rate from 35 to 38 airplanes per month for its 737 program in Mar 2013. It expects to increase this number to 42 airplanes per month by 2014. It plans to make its first delivery of the 737 MAX in 2017.

Boeing is the largest aircraft manufacturer in the world in terms of revenue, orders and deliveries, and one of the largest aerospace and defense contractors. Due to the continuing recovery of the global economy, demand for Boeing’s Commercial Airplanes is benefiting from a steady improvement in passenger and freight traffic.

However, we remain concerned about the depressing atmosphere surrounding the domestic defense budget. The company presently retains a short-term Zacks Rank #3 (Hold).

However, stocks worth considering in the defense and aerospace sector are Northrop Grumman Corporation (NOC) and Wesco Aircraft Holdings, Inc. (WAIR), both with a Zacks Rank #2 (Buy).

 

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