The aerospace giant The Boeing Co. (BA) continues with its quest to develop aviation biofuel. The company has now forged a partnership with Etihad Airways and oil & gas operator TOTAL S.A. (TOT) among others to form an aviation biofuel industry in the United Arab Emirates.
Boeing’s current tie-up with Abu Dhabi-based Etihad Airways will mean that the companies will invest in research and development work for production of fuels from plants that could be used to fly an aircraft.
Though relatively insignificant, the fuel currently used in the aviation industry is a contributor to greenhouse gas emissions, while usage of biofuels can potentially lower the emission level going forward.
The possible environmental benefits of successfully developing such a biofuel have encouraged Boeing to rope in partners. In Feb 2008, airline operator Virgin Atlantic used a Boeing 747 partly fueled by biofuel made of coconut and cabassu for a test flight between London and Amsterdam.
In Oct 2013, Boeing partnered with South African Airways to develop and implement a sustainable aviation biofuel supply chain in Southern Africa. In addition to airliners, Boeing has been instrumental in entering into alliances with governments and research institutions, to develop biofuel supply chains in several countries.
We believe the primary objective of these liaisons is to develop biofuels in commercially useable volumes. The future of biofuels though uncertain is important given the rapidly rising demand for air travel. If we consider Boeing’s backlog of nearly 4,800 airplanes it gives us a fair idea about the future of the commercial airline industry. So, the investment in greener aviation biofuel makes strategic sense.
Boeing currently has a Zacks Rank #2 (Buy). Other players in the aerospace and defense industry, which look attractive at current levels, include Lockheed Martin Corp. (LMT) and General Dynamics Corp. (GD). Both these stocks carry the same Zacks Rank as Boeing.
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