Back to top

Boeing to Deliver 20 737 MAX Jets Worth $2.2B to ALAFCO

Read MoreHide Full Article

The Boeing Company (BA - Free Report) has received an order for 20 additional 737 MAX 8 airplanes from ALAFCO Aviation Lease and Finance Company. Valued at $2.2 billion at current list prices, the order was awarded during the Dubai Air Show. However, the commitment was received during the Paris Air Show.

ALAFCO is a global provider of commercial aircraft leasing products, which has unfilled orders for 20 737 MAX airplanes. With this agreement, the Kuwait-based company is expected increase the count to 40 737 MAXs.

The new 737s will feature the Boeing Sky Interior — the 787 Dreamliner inspired cabin — that provides passengers a sense of space with decorative sidewalls, larger windows, LED mood lighting and larger pivot overhead stowage bins.

Deals Signed at the Ongoing Dubai Air Show

Demand for Boeing’s commercial airplanes has been rising due to a steady increase in passenger and freight traffic.

Of late, at the Dubai Air Show, this aircraft giant received an order for five more 787-8 Dreamliners and a commitment to purchase two large freighters, valued at approximately $1.9 billion, from Azerbaijan Airlines.

Apart from this, the company sealed a deal for delivering 40 787-10 Dreamliners to Emirates,  the largest airline in the Middle East.  The purchase order also comes with equipments related to the 787-10 fleet, valued at $15.1 billion.

Given the enormous commercial demand in the market, Boeing is poised witness significant traction, especially in the single-aisle market.

Global Demand for Single-Aisle Aircraft

Boeing anticipates demand for 29,530 single-aisle jets, worth $3.2 trillion, in the next 20 years. The figure reflects a 5% increase over last year's projection.

Moreover, the company expects single-aisle jets to be the major driver behind the increase in demand, comprising 72% of the total commercial jets’ demand projection. While the new 737 MAX and the 737-800 is likely to grab the lion’s share of the new orders, Boeing’s arch-rival Airbus Group SE’s (EADSY - Free Report) A320neo is expected to pose significant challenges.

Nevertheless, Boeing’s 737 model remains one of the best-selling planes in the single-aisle market, thanks to its fuel efficiency and passenger comfort. Therefore, to maintain its dominance in the commercial aerospace market, this aerospace behemoth continues to invest in research and development for upgrading and churning out upgraded versions of its existing planes.

Middle-East Market Outlook

Recently, Boeing issued its 20-year forecast for jetliner demand in the Middle East at the Dubai Air Show. This projection was based on the company’s belief that political disorder and issues plaguing the three big Gulf carriers will not affect its business in the region.

Per its latest outlook, the Middle East will need 3,350 new planes, worth $730 billion, between 2017 and 2036. Also, Boeing expects twin-aisle airplanes to comprise nearly 50% of the total projection in the same region. This translates into a value of $520 billion, which is over 70% of the total value.

Again, Boeing expects single-aisle jets to comprise over 50% of the total deliveries in the Middle East. To this end, there will be demand for 1,770 single-aisle airplanes, valued at $190 billion, driven by growth of low-cost carriers.

Overall, this aircraft behemoth anticipates the commercial fleet to be fueled by sustained 5.6% annual growth in commercial passenger traffic.

Price Movement

Share price of Boeing has surged 75% over the last 12 months, outperforming the broader industry’s gain of 34.1%. This could be because the company’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, ongoing share repurchases as well as earnings accretive acquisitions.

 


 

The stock also performed better than that of General Dynamics Corporation (GD - Free Report) and Lockheed Martin Corp. (LMT - Free Report) , which missed the industry mark.

Zacks Rank

Boeing carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>



More from Zacks Analyst Blog

You May Like