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Boeing (BA): Delta Air Lines Calls Off 787 Aircraft Order
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The Boeing Company (BA - Free Report) was dealt a sudden blow when Delta Air Lines, Inc. (DAL - Free Report) cancelled a $4.0 billion order for 18 787 Dreamliner jets. Delta Air had inherited the order in 2008 after its merger with Northwest Airlines.
Cancellation is no doubt a setback but the company continues to witness strong demand for its commercial products internationally. Earlier this month, the company inked a high-value deal with Iran Air for 80 jetliners valued at $16.6 billion.
What did Delta Air Have to Say?
According to Greg May, a Delta Air Lines senior vice president of supply chain management and fleet, the order cancellation is in sync with the company’s fleet strategy to judiciously deal with its wide-body aircraft requirements. However, he assured that being the one of the world’s largest operators of Boeing’s aircraft, the company’s partnership with the aircraft manufacturer will remain strong in the years to come.
The company also added that it will stick with its order for 120 narrow-body Boeing 737-900 Extended Range aircraft, scheduled to be delivered through 2019.
Reason for the Cancellation
Like many other top U.S. airlines, Delta Air Lines is trying to limit flight capacity growth and in some cases, minimizing air service in order to accommodate falling airfares.
This has led to many U.S. airlines deferring or cancelling orders for wide-body jets – long-distance jets with two aisles. Earlier this year, Delta Air postponed the delivery of four Airbus Group SE (EADSY - Free Report) A350s to 2019 and 2020, which would have otherwise been rolled out in 2018. This year also saw American Airlines Group Inc. (AAL - Free Report) delay the delivery of 22 A350s by an average of 26 months from the original date in order to cut capital expenses.
Our View
Boeing is the largest aircraft manufacturer in the world in terms of revenue, orders and deliveries, and is one of the largest aerospace contractors. Demand for Boeing’s commercial airplanes is on the rise due to a steady improvement in passenger and freight traffic.
Overall, Boeing anticipates the commercial fleet to double over the next two decades to 45,240 airplanes by the end of 2035, backed by sustained 4.8% annual growth in commercial passenger traffic. For that, the world will need 39,620 new planes, worth $5.9 trillion, between 2016 and 2035, per Boeing’s current market outlook. This is 4.1% above last year's projected demand of 38,050 jets, worth $5.6 trillion, for the 2015–2034 period.
Boeing expects single-aisle jets to be the major driver behind demand growth, comprising 71% of the total projection. This translates into worldwide demand for 28,140 single-aisle jets, worth $3.0 trillion, in the next 20 years. The new Boeing 737 MAX 8 and the current 737-800 will be the major growth catalysts.
Boeing has been enjoying a steady flow of orders globally. The company won net orders for 470 planes through Dec 20, 2016, including 70 orders for the 787 and 340 for the 737.
Price Movement
Boeing’s stock has gained about 9.2% in the last one year, underperforming the Zacks categorized Aerospace/Defense industry’s gain of 10.9%. This could be because Boeing continues to face challenges in the form ofuncertainties related to high-cost programs, risks related to key project executions, order cancellations and stiff competition.
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Boeing (BA): Delta Air Lines Calls Off 787 Aircraft Order
The Boeing Company (BA - Free Report) was dealt a sudden blow when Delta Air Lines, Inc. (DAL - Free Report) cancelled a $4.0 billion order for 18 787 Dreamliner jets. Delta Air had inherited the order in 2008 after its merger with Northwest Airlines.
Cancellation is no doubt a setback but the company continues to witness strong demand for its commercial products internationally. Earlier this month, the company inked a high-value deal with Iran Air for 80 jetliners valued at $16.6 billion.
What did Delta Air Have to Say?
According to Greg May, a Delta Air Lines senior vice president of supply chain management and fleet, the order cancellation is in sync with the company’s fleet strategy to judiciously deal with its wide-body aircraft requirements. However, he assured that being the one of the world’s largest operators of Boeing’s aircraft, the company’s partnership with the aircraft manufacturer will remain strong in the years to come.
The company also added that it will stick with its order for 120 narrow-body Boeing 737-900 Extended Range aircraft, scheduled to be delivered through 2019.
Reason for the Cancellation
Like many other top U.S. airlines, Delta Air Lines is trying to limit flight capacity growth and in some cases, minimizing air service in order to accommodate falling airfares.
This has led to many U.S. airlines deferring or cancelling orders for wide-body jets – long-distance jets with two aisles. Earlier this year, Delta Air postponed the delivery of four Airbus Group SE (EADSY - Free Report) A350s to 2019 and 2020, which would have otherwise been rolled out in 2018. This year also saw American Airlines Group Inc. (AAL - Free Report) delay the delivery of 22 A350s by an average of 26 months from the original date in order to cut capital expenses.
Our View
Boeing is the largest aircraft manufacturer in the world in terms of revenue, orders and deliveries, and is one of the largest aerospace contractors. Demand for Boeing’s commercial airplanes is on the rise due to a steady improvement in passenger and freight traffic.
Overall, Boeing anticipates the commercial fleet to double over the next two decades to 45,240 airplanes by the end of 2035, backed by sustained 4.8% annual growth in commercial passenger traffic. For that, the world will need 39,620 new planes, worth $5.9 trillion, between 2016 and 2035, per Boeing’s current market outlook. This is 4.1% above last year's projected demand of 38,050 jets, worth $5.6 trillion, for the 2015–2034 period.
Boeing expects single-aisle jets to be the major driver behind demand growth, comprising 71% of the total projection. This translates into worldwide demand for 28,140 single-aisle jets, worth $3.0 trillion, in the next 20 years. The new Boeing 737 MAX 8 and the current 737-800 will be the major growth catalysts.
Boeing has been enjoying a steady flow of orders globally. The company won net orders for 470 planes through Dec 20, 2016, including 70 orders for the 787 and 340 for the 737.
Price Movement
Boeing’s stock has gained about 9.2% in the last one year, underperforming the Zacks categorized Aerospace/Defense industry’s gain of 10.9%. This could be because Boeing continues to face challenges in the form ofuncertainties related to high-cost programs, risks related to key project executions, order cancellations and stiff competition.
Zacks Rank
Boeing currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>