Boeing Aircraft Order Book Swells

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The Boeing Company (BA) has received an order for 150 ‘737 airplanes from United Continental Holdings, Inc. (UAL) and its wholly owned subsidiary, United Air Lines, Inc. worth $14.7 billion. The order comprises of 100 737 MAX 9 and 50 Next Generation 737-900 Extended-Range (“ERs”).

737 MAX 7, 737 MAX 8 and 737 MAX 9 are the newest family of Boeing’s airplanes. They have incomparable fuel efficiency in the single-aisle market. Development of the 737 MAX is on schedule and the company plans its firm configuration in 2013, first flight in 2016 and delivery to customers to begin in the fourth quarter of 2017.

When comparing it with today's most fuel-efficient airplanes, 737 MAX will emit 286,000 fewer tons of CO2 and save nearly 200 million pounds of fuel per year. This counts for approximately more than $100 million in cost savings. Moreover, its efficient structural design, lower engine thrust and required maintenance will add to considerable cost advantages for customers.

United Continental Holdings is the North American launch customer for the 737 MAX 9. Since its launch, in August 2011, Boeing has received orders for more than 1,200 737 MAX’s and commitments for purchase from 18 customers worldwide. Taking into consideration all variants of 737, the company currently has orders for 10,039 737 aircrafts.

The company is loaded with order for 737 MAX and ER aircrafts. Recently, Avolon Aerospace committed to buy 10 ‘737 MAX 8s and 5 ‘737 MAX 9s, as well as 10 Next-Generation 737-800s with a list price value of $2.3 billion, at the Farnborough air show in U.K. The commitment also includes reconfirmation rights for 5 more 737 MAX airplanes. In another deal, Kuwait airplane leasing company ALAFCO committed to purchase 20 ‘737 MAX 8 valued at $1.9 billion at current list prices.

Based in Chicago, The Boeing Company is a premier jet aircraft manufacturer and one of the largest defense contractors in the U.S. It is among the best-positioned in its sector due to its balanced exposure to commercial aircraft and defense equipment. We expect the overall growth momentum to be maintained by its order backlog, planned production rate increases and a globally diversified customer base.

However, in the near term, we are concerned about headwinds in the global airline industry along with expected cutbacks in the U.S. defense budget. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

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