Boeing Makes Brisk Biz at Airshow

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Leading commercial airplane producer, The Boeing Co. (BA) has started the iconic Farnborough International Airshow, held in Hampshire, UK, with a bang by securing three multi-billion dollar order commitments for its 737 model.

The first firm order came in from Air Lease Corporation (AL) for 60 ’737 MAX 8 and 15 ’737 MAX 9 airplanes and reconfirmation rights for another 25 ’737 MAX airplanes. The total value of the order at list prices is pegged at $7.2 billion.

This was followed by an even bigger commitment from GE Capital Aviation Services (:GECAS), the commercial aircraft leasing and financing arm of General Electric (GE), to purchase 75 ’737 MAX 8s and 25 Next-Generation 737-800s. The deal valued at $9.3 billion is at list prices.

Boeing also received commitment for 20 ‘737 MAX 8s from Kuwait airplane leasing company ALAFCO. This deal is valued at $1.9 billion at current list prices.

The Boeing 737 MAX is popular in the single-aisle market for its fuel efficiency and low carbon dioxide emissions. Powered by the Commercial Fan Motor (“CFM”) International LEAP-1B engines, the Advanced Technology winglet of this airplane also enhances performance.

Additionally, the pivoting overhead stowage bins add to the spaciousness of the cabin. The bins give passengers more room to keep a carry-on roll-aboard near their own seat besides providing extra leg space. At the end, the 737 MAX 8 is expected to incur the least operating cost in the single-aisle category.

Historically, Boeing offers generous discounts to customers when it comes to securing big orders. Even then, we believe these multi-billion dollar commercial airline contracts will definitely act as a positive catalyst, boosting overall performance, amidst the threat of cutback in the U.S. defense budget.

We believe this commercial order booking in the international airshow will compensate for the lull in order booking experienced by Boeing during the second quarter of 2012. It had secured orders for just 36 airplanes in the said quarter.

Boeing’s international arch rival Airbus also secured a $4.2 billion order for its A350 passenger jets. The order for new airplanes surely indicates a gradual recovery in the commercial airplane market.

Chicago-based The Boeing Co. currently has a Zacks #3 Rank (short-term Hold rating). We also maintain a long-term Neutral recommendation on the stock.

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