Boeing to Compensate for 787 Delays - Analyst Blog


The world's largest manufacturer of commercial jetliners and military aerospace products The Boeing Company ( BA ) is under pressure to compensate Air India with $1 billion. Air India demands the sum for Boeing's delay in delivery of the 787 for more than three years.

Air India had ordered for 27 787 way back in January 2006, of which the first aircraft is expected to be delivered later in February. Earlier, in August 2010, Air India had demanded $840 million from Boeing for the delay.

Boeing's first delivery of the Dreamliner aircraft is more than three years behind the original schedule. The company completed the contractual delivery of the first 787 Dreamliner series aircraft to Japanese carrier, All Nippon Airways, in September 2011. The delays have forced Boeing to pay huge compensation to customers which added to the project's cost.

The Boeing 787 Dreamliner is a long-range, mid-size, wide-body, twin-engine jet airliner. In addition to bringing big-jet ranges to mid-size airplanes, the 787 provides airlines with unmatched fuel efficiency, resulting in exceptional environmental performance. The airplane uses 20% less fuel than similarly sized airplanes.

Currently, the company has net orders for 10 787 aircraft for 2012. The company expects deliveries of 787 and 747-8 to be in the range of 70 to 85 of which half are for Boeing 787 in 2012. It expects production rate for 787 to ramp up from the current rate of 2.5 to 3.5 per month by 2Q12 and 10 per month by 2013.

We believe that the Boeing Company is among the best-positioned in its sector due to its balanced exposure to commercial aircraft and defense equipment. Going forward, we expect the growth momentum to be maintained by planned production rate increases and a globally diversified customer base.

However in the near term, we are concerned about the headwinds over the global airline industry along with expected cutbacks in the U.S. defense budget. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

Headquartered in Chicago, Boeing Company is a premier jet aircraft manufacturer and one of the largest defense contractors in the U.S. The company mainly competes with Lockheed Martin Corporation ( LMT ) and Northrop Grumman Corporation ( NOC ).

BOEING CO ( BA ): Free Stock Analysis Report
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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 The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: BA , LMT , NOC

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