The Boeing Co. BA signed an agreement with Air China, China's biggest airline by market value, to deliver 6 additional 777-300ER (extended range) aircraft, worth over $2.05 billion at current list prices. The actual amount to be paid by the airline company, however, will be less than list prices as Boeing may have granted certain concessions for the deal.
According to Air China, the agreement will increase the capacity of its group fleet by nearly 5% compared with the 2014-end level. With the latest deal, Air China's unfilled aircraft orders with Boeing will become 90, which includes 787-9 Dreamliners. Air China currently operates 174 Boeing planes, including latest models such as the next-generation 737s, 747-8 intercontinental and 777-300ERs.
The Chinese airline is looking to expand its international network, in addition to strengthening and replacing its old, long-haul, widebody fleet.
The 777-300 ER is one of the most advanced twin-engine, long-haul airplanes. It is equipped with the world's most powerful GE90-115B commercial jet engine, and can accommodate 386 passengers in a three-class configuration with a maximum range of 7,930 nautical miles (14,685 km). Its long-range flying capability and fuel efficiency contributed to its popularity among the commercial airline operators. Boeing is planning to improve the design of the 777-300ER in order to reduce fuel consumption in 2016.
In Dec 2015, Boeing received commitment from China Southern Airlines for the purchase of 80 737 aircraft, which includes a combination of 30 Next-Generation 737s and 50 737 MAX airplanes, worth $8.38 billion at current list prices.
In 2015, Boeing received 58 gross orders and 58 net orders for the 777 family, of which, 98 deliveries were made. Last year, the company had received 524 unfilled orders for the 777 family.
Boeing’s commercial delivery of 762 planes during 2015 accelerated 5.4% year over year thanks to robust 737 and 787 deliveries. In the fourth quarter, Boeing delivered 182 commercial airplanes. Boeing delivered 21 units of 777 in fourth-quarter 2015 as against 24 units in the year-ago period. Though the figure decreased year over year, demand for the aircraft is expected to rise in the future.
For Boeing, the title of the world's largest airplane manufacturer maybe attributed to its impressive track record in both innovation and fuel efficiency. Its revenue exposure is spread across more than 90 countries around the globe. Demand for Boeing’s commercial airplanes is on the rise due to a steady improvement in passenger and freight traffic on the back of a recovering global economy. Overall, Boeing anticipates the commercial fleet to double over the next two decades to 43,560 airplanes, fueled by sustained 4.9% annual growth in commercial passenger traffic.
Zacks Rank
Boeing currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the aerospace and defense sector are Leidos Holdings, Inc. LDOS, General Dynamics Corporation GD and Northrop Grumman Corporation NOC, each carrying a Zacks Rank #2 (Buy).
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