The commercial aerospace major
The Boeing Co.
) sealed a big deal for its wide-bodied 777X aircraft from Dubai's
Dubai's Emirates Airline confirmed it will buy 150 777X aircraft,
comprising 115 Boeing 777-9Xs and 35 777-8Xs, for a whopping $56
billion at list prices. Generally airlines get large discounts on
bulk orders. Emirates Airline also has purchase rights to buy an
additional 50 airplanes, which if exercised would boost the value
to nearly $76 billion at list prices. The deal finalizes a
commitment announced at the Dubai Airshow last year.
The latest win for Boeing comes after Emirates scrapped a deal with
European rival Airbus Group NV for 70 A350 wide-body planes valued
at $16 billion in June this year.
777X - the upgraded version of the 777 - was launched at the Dubai
Airshow with much fanfare. This iconic airplane generated keen
interest among airline operators worldwide. The company received
commitments for 259 airplanes from four customers at the event.
Boeing is currently developing two variants of the 777X, namely,
777-8X and 777-9X, the prices of which are pegged at $349.8 million
and $377.2 million respectively. Boeing claims that these
models will consume 12% less fuel and its operating cost will be
10% lower than its peers. To date, the 777X has gathered 300 orders
and commitments from six customers worldwide.
Production of this airplane is scheduled to start from 2017 and
delivery expected to begin from 2020. Boeing is developing this
version on the already proven technology of its 777 and 787
Dreamliner. Last month, Boeing extended its five-decade-long
Japanese relationship by roping in as many as five partners from
the country to help build the 777X.
The aerospace giant is indeed flying high on the strength of its
Commercial Airplanes Business. Recently, Boeing reported strong
delivery numbers for the second quarter as well as the first half
of 2014, beating its archrival Airbus. The company seems to have
retained its title of the world's largest airplane manufacturer
given its impressive track record in both innovation and fuel
We expect Boeing to notch up record jet deliveries in the future
driven by growing passenger traffic in the Asia-Pacific region as
well as in the Middle East. Although the latest confirmation of the
Emirates order will not influence Boeing's second-quarter results,
which are scheduled to be released on Jul 23 before the opening
bell, it will boost its future revenue stream.
However, the latest win failed to have any impact on Boeing's share
price yesterday, closing at $126.79, on par with the previous
trading session. Boeing shares have been affected by lurking fears
of a possible shutdown of the U.S. Export-Import Bank (Ex-Im Bank).
Boeing would be the prime loser if Washington decides to put the
shutters down on Ex-Im Bank, as the company is its single-largest
beneficiary, receiving public financing for the sale of aircraft to
foreign airlines. Boeing shares have lost 7.23% since the start of
In spite of this headwind, Boeing has steadily grabbed orders from
foreign airlines for its fuel-efficient airplanes. Its delivery
numbers continue to impress. The upcoming Farnborough International
Airshow, to be held between July 14 and 20, is likely to fetch
fresh orders for both Boeing and Airbus in this highly duopolistic
aircraft manufacturing market.
Boeing currently has a Zacks Rank #2 (Buy). Other well-placed
players in the aerospace and defense industry include
Lockheed Martin Corp.
Northrop Grumman Corp.
Huntington Ingalls Industries, Inc.
), all carrying a rank similar to Boeing.
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