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Boeing (BA) Set to Win $4 Billion Order for 747 Freighters
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The Boeing Co. (BA - Free Report) seems to be nearing a $4 billion deal with Russia’s air-freight company AirBridgeCargo Airlines. The deal, if it materializes, would give a much needed breathing space for the company’s four-engine jumbo category, Boeing 747.
According to a Bloomberg report, Boeing is in talks with AirBridgeCargo Airlines and its Moscow-based parent, Volga-Dnepr Group, to transform a year-old commitment into 10 firm orders or more for 747-8 freighters.
Last July, Boeing signed a memorandum of understanding (MoU) with Volga-Dnepr Group that operates the cargo carrier, AirBridgeCargo Airlines, at the Paris Air Show for 20 freighter version of the 747 aircraft.
The deal would come to nearly $3.8 billion on list prices of $379.1 million. Buyers typically get discounts on the total value though. The potential deal is likely to be officially announced at the Farnborough Airshow next month in England.
The 747 freighter is one of Boeing’s most expensive commercial jets because of its hinged nose that allows large cargo to be loaded at the front.
Although Volga-Dnepr as well as Boeing representatives declined to comment on the news, the airline said that it has plans to take the entire 20 jumbos it committed last year.
Market Dynamics
Boeing 747, which came into service in 1970, is also designed as a cargo aircraft. It has gained popularity among air freight firms given its large capacity.
However, Boeing has decided to slow down the production of its wide-bodied jet airliner because of the weak cargo market. The world’s leading plane maker intends to reduce the monthly production of its 747-8 jetliner to 0.5 aircraft a month from 1 starting Sep 2016. Nevertheless, Boeing, in its annual report for this year, said that it plans to boost the production rate back to one plane per month in 2019.
The cut comes amid weak demand for four-engined aircraft as airlines shift to twin-engined jets for even the longest-haul routes. It is important to note here that Boeing’s commercial deliveries in the first quarter declined due to lower demand for its older long-range 767 and double-decker 747 jets. The company delivered just one 747 in the quarter, compared with four units of 747s in the prior year.
According to the International Air Transport Association, air freight revenues decreased to $52.8 billion in 2015 from $67 billion in 2011. Cargo carrier load factor was down to 47.4% in 2015, while passenger carrier load factor was over 80%.
Zacks Rank
Boeing currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the aerospace and defense industry are BAE Systems plc (BAESY - Free Report) , Engility Holdings, Inc. and Leidos Holdings, Inc. (LDOS - Free Report) . While BAE Systems sports a Zacks Rank #1 (Strong Buy), Engility and Leidos hold a Zacks Rank #2 (Buy).
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Boeing (BA) Set to Win $4 Billion Order for 747 Freighters
The Boeing Co. (BA - Free Report) seems to be nearing a $4 billion deal with Russia’s air-freight company AirBridgeCargo Airlines. The deal, if it materializes, would give a much needed breathing space for the company’s four-engine jumbo category, Boeing 747.
According to a Bloomberg report, Boeing is in talks with AirBridgeCargo Airlines and its Moscow-based parent, Volga-Dnepr Group, to transform a year-old commitment into 10 firm orders or more for 747-8 freighters.
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Deal Details
Last July, Boeing signed a memorandum of understanding (MoU) with Volga-Dnepr Group that operates the cargo carrier, AirBridgeCargo Airlines, at the Paris Air Show for 20 freighter version of the 747 aircraft.
The deal would come to nearly $3.8 billion on list prices of $379.1 million. Buyers typically get discounts on the total value though. The potential deal is likely to be officially announced at the Farnborough Airshow next month in England.
The 747 freighter is one of Boeing’s most expensive commercial jets because of its hinged nose that allows large cargo to be loaded at the front.
Although Volga-Dnepr as well as Boeing representatives declined to comment on the news, the airline said that it has plans to take the entire 20 jumbos it committed last year.
Market Dynamics
Boeing 747, which came into service in 1970, is also designed as a cargo aircraft. It has gained popularity among air freight firms given its large capacity.
However, Boeing has decided to slow down the production of its wide-bodied jet airliner because of the weak cargo market. The world’s leading plane maker intends to reduce the monthly production of its 747-8 jetliner to 0.5 aircraft a month from 1 starting Sep 2016. Nevertheless, Boeing, in its annual report for this year, said that it plans to boost the production rate back to one plane per month in 2019.
The cut comes amid weak demand for four-engined aircraft as airlines shift to twin-engined jets for even the longest-haul routes. It is important to note here that Boeing’s commercial deliveries in the first quarter declined due to lower demand for its older long-range 767 and double-decker 747 jets. The company delivered just one 747 in the quarter, compared with four units of 747s in the prior year.
According to the International Air Transport Association, air freight revenues decreased to $52.8 billion in 2015 from $67 billion in 2011. Cargo carrier load factor was down to 47.4% in 2015, while passenger carrier load factor was over 80%.
Zacks Rank
Boeing currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the aerospace and defense industry are BAE Systems plc (BAESY - Free Report) , Engility Holdings, Inc. and Leidos Holdings, Inc. (LDOS - Free Report) . While BAE Systems sports a Zacks Rank #1 (Strong Buy), Engility and Leidos hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>