The Boeing Company (BA) sealed an aircraft contract from Qatar Airways for 50 777-9X aircraft valued at $18.9 billion at list prices. Qatar Airways has an option to purchase an additional 50 777-9X airplanes from Boeing, taking the tally to 100 aircraft. If the option is exercised, the transaction will amount to $37.7 billion at list prices.
Qatar Airways has further plans to order four 777 Freighters with an option to buy four more. The combined value of the contract will come to $2.4 billion at list prices.
Boeing finds in Qatar Airways a loyal customer often receiving orders from the latter. In Feb 2014, Boeing inked a five-year agreement with Qatar Airways to provide Boeing Wind Updates services. These services offer customized, real-time wind and temperature information to airplanes. Airlines generally prefer homogeneity in their fleets which help in lowering maintenance costs and reinforcing family ties. So, we often find “a Boeing airline” or “an Airbus airline”. Boeing and Airbus constitute a highly duopolistic commercial airplane manufacturing market.
Coming back to the current order, the announcement regarding the mega 777-9X deal was initially made at the 2013 Dubai Airshow. Boeing frequently participates in different domestic as well as international airshows to launch and promote its product and service portfolio. These initiatives enable the company to win new contracts and renew existing ones.
Boeing had launched its new 777X, fuel efficient, twin-engine jetliner during the Dubai Airshow. The new 777X aircraft received an enthusiastic response from foreign customers. Apart from Qatar Airways, Boeing had received orders from Abu Dhabi-based Etihad Airways to deliver 777-9X, 777-8X and 787-10 airplanes.
The Boeing 777-9X is considered to be the largest and most competent twin-engine commercial jet in the world. The aircraft has over 400 seats. Its fuel consumption is cut by as much as 12% along with having 10% lower operating costs. 777X deliveries are expected to start from 2020.
The 777-9X is witnessing brisk demand in the commercial aircraft market, primarily in China, India, the Middle East and other emerging countries due to the growing popularity of the low-cost carrier business. To date, Boeing has won contracts for 300 777X aircraft.
Boeing is currently engaged in implementing modern technologies in the 777X aircraft, including the use of an advanced commercial engine, the GE9X, manufactured by GE Aviation, a unit of General Electric Company (GE) and an all-new high efficiency composite wing. These initiatives will enable the company to upgrade the 777X airplane, thereby winning more contracts.
Boeing currently has a Zacks Rank #3 (Hold). However, some better-ranked stocks in the defense and aerospace sector include Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC). Both these stocks carry a Zacks Rank #2 (Buy).
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