The Boeing Company (BA - Free Report) received an order from an affiliate of Britain’s Thomson Airways, TUI Travel, for the delivery of 60 737 MAX jets with the option of supplying a further 90 of the fuel-efficient planes.
The 737 MAX, a narrow body plane, is the newest offering from Boeing designed to compete with its close rival Airbus’ A320 neo. The order is expected to fetch Boeing roughly $6.09 billion.
The latest 737 MAX, power-driven by CFM International's LEAP-1B engines, burns 13% less fuel compared to older models. Production for these models is expected to commence in 2015 with delivery slated to begin from 2017. However, TUI Travel expects deliveries between Jan 2018 and Mar 2023.
With the company benefiting from economies of scale that led to reduction in per unit research and development cost, production of the 737 planes is expected to move north. Also, with the 787 battery issue been put to rest, Boeing expects production of this plane to accelerate too. It recently clinched a delivery order of 30 787 planes from Singapore Airlines.
Contract flows for Boeing has been consistent in spite of the 787 controversy. In Mar 2013, the company booked an order for supplying 175 single aisle 737’s from Ireland-based budget airline Ryanair Holdings plc. (RYAAY - Free Report) .
We expect Boeing to fly high on the strength of its net orders of 428 planes as on May 28, 2013. The company delivered a total of 181 planes through Apr 2013. We believe Boeing is close to achieving its targeted delivery range of 635-435 planes with the settling of the 787 matter.
Of late, business from emerging countries like India and China look encouraging given the rise in airline activities. China resumed its order for Boeing’s planes this month while the company expects India to be another major possible client.
However, the defense budget headwinds would continue to act as a deterrent to growth. Boeing currently carries a Zacks Rank #3 (Hold).
Among aerospace and defense operators, Erikson Air-Crane Inc. presently holds a Zacks Rank #1 (Strong Buy). Also worth a look is Zacks Rank #2 (Buy) B/E Aerospace, Inc. .