The Boeing Co. (BA) is discussing the terms of a purchase agreement with Azerbaijan’s Silk Way West Airlines for three 747-8 freighters. The deal, when finalized, will be a boost for Boeing as its biggest and most pricey model ended 2014 with no net orders. The companies are working for a purchase agreement that will be valued at $1.1 billion plus at list prices, upon finalization.
Silk Way West is an enterprise of the Silk Way Group, which includes 23 companies working in the aviation industry and related services. The airline already operates seven Boeing airplanes, comprising two 767-300 Freighters, three 747-400 Freighters and two 747-8 Freighters.
Amid a weak cargo market, Boeing decided to slow down the production of its wide-bodied jet airliner last month. The world’s leading plane maker will reduce the monthly production of its 747-8 jetliner to 1.3 aircraft a month from 1.5. The production slowdown will lower 747 annual deliveries to approximately 16 from 18 starting Sep 2015. Boeing cited lower-than-expected recovery in the cargo market as the reason behind the cut. This will enable Boeing to better execute its Commercial Airplanes business.
Boeing had already cut its 747 production in 2013 to 1.5 planes annually. Since the first delivery in 1970, Boeing has delivered 1,498 units of its iconic 747 airplane.
The 747-8 variant, since its launch in 2005, has managed to book only 119 orders, including 68 for the cargo version and the balance for passenger jets. It has delivered 80 747-8 to date and still has a backlog of 39 aircraft through Nov 2014, comprising 26 orders for the passenger version and 13 for freighter aircraft. Boeing has delivered 19 747s through Dec 2014, at a rate of about 1.5 per month. The company still has faith in the longer-term strength of the freighter market.
The wide-body jet airliner – Boeing 747-8 – is the fourth-generation Boeing 747 version, with lengthened fuselage, redesigned wings and improved efficiency. The jet airliner has two main variants – the 747-8 Intercontinental (747-8I) for passengers and the 747-8 Freighter (747-8F) for cargo.
Zacks Rank
Boeing carries a Zacks Rank #3 (Hold). Better-ranked stocks in the defense and aerospace sector include General Dynamics Corp. (GD), Erickson Incorporated (EAC) and Huntington Ingalls Industries, Inc. (HII), all carrying a Zacks Rank #2 (Buy).
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