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BA Wins $7.0B Cathay Pacific Order

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The aerospace giant The Boeing Company (BA) won a significant order from Hong Kong's carrier Cathay Pacific Airways (“Cathay Pacific”) to provide 21 777-9X aircraft. The contract is valued at $7.0 billion at list prices and is a part of Cathay Pacific’s long-haul fleet strategy for the future.

Boeing introduced its new 777X variant, fuel efficient, twin-engine jetliner during the Dubai Airshow. The Boeing 777-9X is considered the largest and most competent twin-engine commercial jet in the world and holds around 400 seats. The jet’s fuel consumption is cut by as much as 12% along with having 10% lower operating costs. The primary 777 version deliveries are expected to start from 2020.

Boeing and Cathay Pacific have a four-decade-old relationship. Under the aircraft portfolio, Cathay Pacific operates a fleet of 55 777s. In Mar 2013, the company received an order worth $1 billion from Cathay Pacific for three 747-8 Freighter airplanes. The contract has an option to purchase an additional 5 777 freighters.

We note that the 777-9X is witnessing rising demand in the commercial aircraft market, primarily on the back of expansion of air services in China, India, the Middle East, Indonesia, Turkey and other emerging countries due to the popularity of the low-cost carrier business.

On Nov 17, 2013, Boeing received a contract, worth $26.7 billion at list prices, from Etihad Airways. Etihad placed firm orders for 56 Boeing aircraft and an option to buy an additional 26 along with 30 787-10 Dreamliners.

Year to date, Boeing notched 88 net orders for the 777, comprising 8.2% of total net orders. We believe a growing order book for the newly introduced aircraft showcases the confidence that airliners have in this twin-engine jetliner, which will boost Boeing's revenues in its commercial airplane business.

Boeing’s effort towards wining more foreign commercial orders besides receiving domestic contracts will likely boost its performance going forward.

Boeing currently has a Zacks Rank #2 (Buy). Apart from manufacturing aircraft, the company also has expertise in the defense sector and is one of the major defense operators. Other stocks from the sector that are presently performing well include Alliant Techsystems Inc. (ATK), Teledyne Technologies Inc. (TDY) and Huntington Ingalls Industries, Inc. (HII). While Alliant Techsystems holds a Zacks Rank #1 (Strong Buy), Teledyne Technologies and Huntington Ingalls Industries carry a Zacks Rank #2 (Buy).

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