The Boeing Co.
) has secured a commitment for 50 of its 737 aircraft from China's
newest low-cost airline - 9 Air. A surge in the middle class
population and growing demand for cheap flying options have made
low-cost travel a hot business in this region.
9 Air, an affiliate of Juneyao Airlines Co., has plans to introduce
the next-generation models of the 737 and 737 Max to its all-Boeing
fleet. This new low-cost carrier plans to start domestic services
in China in order to meet growing air traffic demand in the region.
As per Boeing's list prices, its 737 aircraft generally sells for
$76 million to $109.9 million. On the basis of these prices, the
latest order may come in a price band of $3.8 billion and $5.5
billion. We expect 9 Air to get a discount on list prices as is the
custom with Boeing on bulk orders.
Low cost carriers, with their ability to stimulate traffic with low
fares, are growing faster than the market as a whole. There is also
a strong demand to replace older, less fuel-efficient airplanes.
The market for new airplanes is set to become more geographically
balanced in the next two decades. Asia-Pacific, including China,
will however continue to lead the way in total airplane deliveries.
Earlier, Boeing had already revealed that Asia-Pacific will require
12,820 airplanes worth $1.9 trillion in the next two decades. The
deliveries will account for a sizeable 36% of the global commercial
airplane delivery in the aforesaid period. These deliveries will
triple the size of the Asia-Pacific aircraft fleet by 2032 from
Not surprisingly, Boeing is likely to be a major beneficiary of
this demand explosion, as nearly 69% of the new additions will be
in the single-aisle market. The emphasis being on swift, low-cost
travel, Boeing with its fuel efficient single-aisle airplanes like
the Next-Gen 737 and the 737 MAX will definitely secure a good many
of these potential orders.
Given its impressive track record of both innovation and fuel
efficiency, we expect Boeing to come out with newer variants of
single-aisle aircraft, always a step ahead of its competitors.
With a backlog of orders worth $441 billion as of 2013, Boeing has
been ramping up its production of big commercial aircraft. In a
separate release, Boeing announced that Italian carrier Neos will
become an operator of the Boeing 787. The airline has agreed to
lease two Boeing 787-8 Dreamliners from International Lease Finance
Corporation (ILFC). Based at Milan Malpensa Airport, in northern
Italy, Neos will be Italy's first Boeing 787 operator when it takes
delivery of the two leased 787-8s from ILFC in 2018. ILFC is the
largest customer for the Boeing 787. It has 74 of these planes on
Boeing currently holds a Zacks Rank #2 (Buy). Other well-placed
stocks in the industry include
Alliant Techsystems Inc.
), all with a comparable Zacks Rank #2 (Buy).
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