Boeing Confirms $56 Billion Emirates Order for 777X - Analyst Blog


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The commercial aerospace major The Boeing Co. ( BA ) sealed a big deal for its wide-bodied 777X aircraft from Dubai's Emirates Airline.

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 efficiency.

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 the year.

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. ( LMT ), Northrop Grumman Corp. ( NOC ) and Huntington Ingalls Industries, Inc. ( HII ), all carrying a rank similar to Boeing.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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