- Rising air travel in emerging markets and the replacement
of older airplanes in mature markets like North America and
Europe are resulting in strong demand for airplanes
manufactured by Boeing
- Strong demand coupled with a backlog of over 4,450
airplanes, which at current production rates will take Boeing
more than 7 years to deliver, is causing Boeing to raise
production rates of many of its models including 737, 777 and
- Higher production rates will lead to increased deliveries
which will drive profit growth in 2013
) is increasing the production rates of many of its models
including 737, 777 and 787 in its commercial airplane business on
strong demand and a healthy backlog. Higher production rates will
lead to increased deliveries which will drive growth in company
profits in 2013.
In emerging markets like Asia-Pacific and Latin America, demand
for air travel has been rising which is pushing airlines to expand
their fleets in these regions. In North America, growth in
passenger travel is outpacing increases in flying capacities. This
is driving up occupancy rates (the percentage of seats occupied in
a flight) and airplane utilization rates (the percentage of time
spent flying by an airplane) to record levels boosting airlines'
profitability. This is allowing airlines in North America to
replace their older planes with newer ones.
In all, air travel demand in emerging markets and replacement
demand from more mature markets like the U.S. and Europe are
driving growth in Boeing's orders and backlog. At the end of
February 2013, Boeing's total unfilled orders for commercial
airplanes increased to 4,472 from 3,771 at the beginning of
We currently have
price estimate of $82 for the company
, approximately in line with its current market price.
See our complete analysis of Boeing here
Production rate for Boeing 737s being raised to 38
airplanes per month
Currently, Boeing is increasing the 737 production rate to 38
airplanes per month, and this is set to rise further to 42
airplanes per month in the first half of 2014. Continued growth in
demand for 737NG models (737-600/-700/-800/-900ER) is forcing the
company to hike its production rates. Boeing is presently sitting
on 1,951 unfilled orders for 737NGs, and at the above rates it will
take the company over four years to make these deliveries.
Additionally, orders for the fuel-efficient 737MAX which is
under development is adding to the backlog provided by 737NG. This
model generated a record breaking 914 orders in 2012. It has
continued its strong performance in 2013, notching 121 orders in
January and February. However, 737MAX's order tally for the full
year 2013 will likely fall short of its 2012 level. A similar
phenomenon was observed for Airbus when orders for its newly
launched A320neo declined in 2012 after setting a record of 1,226
in 2011. Boeing had launched the 737MAX in late 2011 in response to
the launch of Airbus' A320neo in 2010.
In all, unfilled orders for Boeing's 737 series rose to 3,136
through February 2013, up from 3,074 at the end of 2012 and from
2,365 at the end of 2011.
Production rate for Boeing 777 hiked to 8.3 airplanes per
The company also recently ramped up production of its wide body
Boeing 777 to 8.3 airplanes per month (100 per year), from 7
airplanes per month. Improved efficiencies achieved through
manufacturing innovation also contributed to the rise in 777′s
production rate. Currently, Boeing takes 48 days to build a 777.
Total unfilled orders for this model stood at 363 at the end of
Production rate for Boeing 787 being raised to 10
airplanes per month
Boeing is also raising the 787 Dreamliner production rate even
though it is not delivering these planes due to the grounding order
from the Federal Aviation Administration (
). This indicates that the company is confident that it will
resolve the 787 battery issue in a timely manner and get requisite
approvals from the FAA (See
Boeing Hopes To Return 787s To The Skies Soon With
Its Proposed Fix
). The 787 program is currently manufacturing at a rate of 5
per month, which is set to rise to 10 per month by the end of
2013. At a recent aviation conference, Boeing Commercial
Airplanes CEO Ray Conner said that part of Boeing's 787 supply
chain had already reached supply levels commensurate with a
production rate of 7 airplanes per month. Unfilled orders for 787s
were 841 through February 2013, up from 799 at the end of 2012.
Increased competition in certain categories will hamper
further production rate hikes
Looking ahead, further production rate hikes for certain Boeing
models particularly the wide body 777 and 787 will face pressure
from the entry of Airbus A350 in mid 2014. Airbus says that this
model will be more fuel efficient with lower operating costs than
the Boeing 787 Dreamliner.
Additionally, production rates of other models like 747 are
being held steady by the company due to a fall in their demand.
Demand for 747′s freighter version has dropped recently due to the
decline in global freight and cargo markets. As a result, backlog
for this aircraft has declined over the past year. Total unfilled
orders for 747 were 67 at the end of February 2013, down from 97 at
the end of 2011.
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