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Boeing (BA) to Nab $7.4B Ethiopian Airlines Order for 777X

Zacks Equity Research

Boeing Co.’s BA shares edged up 1.78% on Oct 7 as Ethiopian Airlines CEO Tewolde Gebremariam revealed its plan to place an order for Boeing's 777X long-range jetliner before the end of 2015, per a Wall Street Journal report.

The East African airline is considering to buy 15 to 20 of Boeing's new 777X planes worth about $7.4 billion at list prices.

Although the airline had initially considered buying Airbus' A350-1000 planes, they changed their mind in favor of Boeing 777X as the aircraft is more suitable for operations at their high-altitude hub in Addis Ababa. The new planes are due for delivery in 2020.

A-350 vs. 777

The Airbus A-350 model was developed to compete with Boeing’s 777X. A-350 is a twin engine, wide body long range aircraft developed by Airbus. An A-350 can carry 250 to 400 passengers depending on the variant.

The 777X from Boeing’s 777 family will be the primary competitor for the long range A-350 model. 777X is expected to be more fuel efficient than A-350 and carry 350 to 400 passengers. About 21% of the airplane’s structural components will be manufactured by Japanese companies. The 777X model was launched at the Dubai Air show last year and received 259 commitments from four airline operators. As of Sep 2015, Boeing had a total of 306 unfilled orders for 777x.

Robust Commercial Picture

A Boeing study has identified huge possibility in the commercial aerospace market. Demand for Boeing’s commercial airplanes is on the rise owing to the steady improvement in passenger and freight traffic especially in the emerging markets. In its recently released outlook, Boeing anticipates the commercial fleet to double over the next two decades to 43,560 airplanes, fueled by sustained 4.9% annual growth in commercial passenger traffic.

Recently, the aerospace giant reported strong third-quarter as well as nine-month 2015 delivery numbers. The company delivered 580 commercial jetliners so far this year, increasing 9.8% year over year and beating its archrival Airbus.

Airbus reported that it has delivered 446 planes in the first nine months of this year.

Zacks Rank

Boeing currently has a Zacks Rank #2 (Buy). Some of the other favorably ranked players in the aerospace and defense industry include General Dynamics Corp. GD, Lockheed Martin Corp. LMT and Northrop Grumman Corp. NOC, all with a Zacks Rank #2 (Buy).

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