The Boeing Company
) is flying high on demand for its new fuel-efficient commercial
planes from airlines around the world. The maturing U.S. airplane
market, once deemed to be the largest, has had little impact on
this commercial airplane maker. Any slowdown in demand in the
U.S. has been more than compensated by a fast expanding Asian
As per media reports, the plane maker has secured commitments
from various Chinese customers for about 200 of its upgraded
variant of the short-haul aircraft, the 737 Max. The deal, which
is subject to the Chinese government's approval, has a combined
value of $20.7 billion at list prices. This marks the first
commitment for the 737 Max from China.
This staggering order came from a wide range of customers
comprising China's state-owned airlines, China Aviation Supplies
Holding Company, as well as leasing firms associated with the
country's banks. We note that Air China, China Eastern Airlines
and China Southern Airlines all operate the current models of
Boeing's 737 in the country.
The fourth generation of the 737 family - the 737 Max - has been
upgraded with new and more fuel efficient CFM International
LEAP-1B engines. Boeing's 737 MAX, which competes with its
European rival Airbus' A320 neo, has firm orders totaling 1,567
as of Sep 2013. From China alone, Boeing estimates delivery 3,900
single-aisle aircraft in the next two decades.
Meanwhile, Boeing also clinched a firm order from Korean Air
Lines Co. in a deal worth $3.9 billion in list price to modernize
its fleet. Particularly, the country's biggest carrier is buying
five 747-8 Intercontinentals, five 777-300ERs and one 787
Dreamliner. The deal was approved by the board of Korean Air.
Korean Air currently has a fleet of 90 Boeing passenger airplanes
mainly comprising the 737, 747 and 777 planes. The airline also
uses Boeing's other aircraft like the 747-400, 747-8 and 777
Freighters. In fact, the airline's Aerospace unit is partnered
with Boeing on both the 747-8 as well as 787 programs.
Adding to Boeing's swelling order book, the U.S. plane maker has
reached an agreement recently to sell 20 Boeing 737-800 jets to
Aerolineas Argentinas. The deal is worth $1.8 billion at list
With a backlog of orders worth $415 billion, Boeing has been
ramping up its production of big commercial aircraft. On
Wednesday, Boeing reported strong third-quarter 2013 numbers and
raised its full-year outlook on soaring commercial aircraft
deliveries and margins. Its shares also hit an all-time high.
The stellar third-quarter results from its commercial airplane
biz, which delivered more planes at higher profit margins in the
quarter, helped offset the weakness in the defense division,
where revenues rose just 3%, margins contracted and profits were
The aerospace giant says that it will speed up the production of
the new 787 by 40% by the end of the decade. The 787 Dreamliner
has been beset by problems from the very beginning and this year
has seen no end to Dreamliner worries. Issues pertaining to the
plane's reliability and safety still harass airline operators,
and Boeing engineers.
Boeing is the largest aircraft manufacturer in the world in terms
of revenue, orders and deliveries, and one of the largest
aerospace and defense contractors apart from
Lockheed Martin Corp.
Northrop Grumman Corp.
General Dynamics Corp.
). Though the company has had glitches with its 787 mascot with
respect to several technical dilemmas, its share price has proven
to be shock resistant, surging 69.9% so far this year. The
company presently retains a short-term Zacks Rank #3 (Hold).
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