The Boeing Company (BA) once again reported industry record deliveries in 2014, retaining its position as the world’s biggest airplane maker. The aerospace major reported all-time high jet deliveries for 2014, beating its own projection, driven by strong commercial numbers. The heightened deliveries were also a function of an increased production rate.
Boeing’s commercial delivery of 723 planes during 2014 accelerated 11.6% year over year thanks to robust 737 and 787 deliveries. It had projected deliveries between 715 and 725 airplanes for 2014. The year-end figure is likely to beat deliveries of its main European rival Airbus, which expects flat year-over-year numbers. Airbus is scheduled to report its annual orders and deliveries on Jan 13.
Boeing further plans to boost 737 output to 52 airplanes per month in 2018, up from the existing 42 and from a planned level of 48 in 2017. This will mark yet another new production record for any jet in history, with an annual rate of 624 737s per year. The fourth generation of the 737 family – the 737 Max – is a premier aircraft from Boeing’s stable and sees brisk demand in the single-aisle market for its fuel efficiency and low carbon dioxide emission.
In the fourth quarter of 2014, Boeing delivered 195 commercial airplanes, approximately 13.4% higher than the year-ago figure. During the quarter, the Next Generation 737 model proved its popularity once again, delivering 126 airplanes, followed by its 787 model with 35 deliveries. In the year-earlier period, the company had delivered 110 units of the 737 and 25 units of the 787 model. Boeing delivered 24 units of 777 in fourth-quarter 2014 as against 25 units in the year-ago period.
Boeing delivered its 787 at a rate of nearly 12 per month in the fourth quarter, up from about nine a month in the rest of 2014.
Meanwhile, Boeing’s deliveries in the defense and space business were 43 in fourth-quarter 2014 compared with 52 in the year-ago period. The breakdown includes 15 Apache helicopters, 8 Chinook helicopters, 8 F/A-18E/F and EA-18G fighter jets, as well as 5 units of P-8, 4 F-15, 2 satellites (government & commercial) and 1 C-40.
Boeing booked 1,432 net orders (accounting for cancellations), up 5.7% from 1,355 a year ago, breaking the previous all-time high set in 2007. Boeing’s net orders will probably not beat Airbus Group out of the top spot for booking new business. Between Jan and Nov 2014, Airbus bagged 1,328 gross orders. After adjusting for cancellations, it had 1,031 net orders.
The improvement in backlog at the two major aircraft manufacturers indicates a boom in air travel. Boeing’s long-term outlook in the commercial space indicates that demand for aircraft will increase by more than 100% in 2033 from 2013 levels. Boeing projects that 42% of this rise will be additions to replace an older fleet while the balance will be for new airplanes.
Per the Boeing report, air traffic is expected to grow 5% and cargo traffic to rise 4.7% annually in the next two decades. We believe that the surging global airplane demand is strong enough to accommodate not only Boeing and Airbus but also the Brazilian aerospace conglomerate Embraer SA (ERJ).
For Boeing, the title of the world's largest airplane manufacturer maybe attributed to its impressive track record in both innovation and fuel efficiency. We expect Boeing to continue to notch up record jet deliveries in the future driven by growing passenger traffic in Asia-Pacific.
Currently, Boeing has a Zacks Rank #2 (Buy). Other well-placed players in the aerospace and defense industry include General Dynamics Corp. (GD) and Huntington Ingalls Industries, Inc. (HII), both carrying a Zacks Rank #2.
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