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Boeing Updates on '14 Delivery Financing - Analyst Blog

The world's largest aircraft manufacturer, The Boeing Co. ( BA ), in its seventh annual aircraft finance market forecast, predicts $112 billion worth of passenger jet deliveries in 2014 (up 7.7% year over year) across the aviation industry. This implies a staggering level of funding due to come from investors and financiers.

The plane maker projects that capital markets will provide 22% of financing for new aircraft deliveries next year, up from 14% in 2013 and just 3% in 2009. The company is extremely bullish on its Super Hornet and Growler production. Of the $112 billion in jet sales projected for next year, Boeing believes as much as 95% will be shared between Boeing and Airbus.

The sector's diminishing reliance on export credit agencies ("ECA"), which will finance only 18% of 2014 sales (down from 23% in 2013) and the speedy development of commercial aircraft-backed bond issuances are the contributory factors to financing realignment.

Boeing also expects banks to offer 25% of 2014 financing, compared with 28% in 2013. Again, Chinese banks will likely rule, overtaking Japanese banks, as they are the second-largest providers of bank debt at 23%, following the European banks at 25%. Hence, commercial banks are expected to play a pivotal role and act as the largest source of funding in 2014.

Boeing, with a robust backlog and growing deliveries, remains well on-track despite the many technical glitches plaguing the much-hyped Dreamliner. The gradual recovery in the global economy is bringing in a steady improvement in passenger and freight traffic. As per the International Air Transport Association (IATA), global airline passengers will touch the 3.6 billion mark in 2016, expanding 5.3% per annum in the period 2012 to 2016.

After dominating the Dubai Air Show with orders worth $101.5 billion, Boeing looks to be in an advantageous position when compared to archrival Airbus. It has $95 billion worth of orders and commitments for its new 400-seat 777x. With the assurance of first 777x deliveries by 2020, the company is now intent on quickly selecting the production site.

Boeing had requested bids from a number of states in November with a deadline set for mid December. Officials in Alabama, California, Missouri, South Carolina, Texas and Utah are among those who are wooing Boeing with economic incentive packages worth millions of dollars. A win for the Boeing plant would mean the creation of thousands of jobs for that sate.

In the recent past, Washington lost 777x production after union machinists rejected a proposed contract with Boeing. However, the state has recently approved tax breaks valued at $9 billion over the coming years and passed legislation to enhance aerospace training programs and permitting.

In Missouri, Gov. Jay Nixon signed into law a $1.7 billion tax incentive package. The company currently employs about 15,000 people. The tax credits are worth up to $150 million annually over 23 years upon successful accomplishment of Boeing's target of 8,000 new jobs.

With its strong presence in the commercial airplanes industry, Boeing currently holds a Zacks Rank #2 (Buy). One can also look at Raytheon Co. ( RTN ), Huntington Ingalls Industries, Inc. ( HII ) and Arotech Corp. ( ARTX ) as good buying opportunities. While Raytheon sports a Zacks Rank #1 (Strong Buy), Huntington Ingalls and Arotech hold a Zacks Rank #2 (Buy).

AROTECH CORP (ARTX): Free Stock Analysis Report

BOEING CO (BA): Free Stock Analysis Report

HUNTINGTON INGL (HII): Free Stock Analysis Report

RAYTHEON CO (RTN): 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 Nasdaq, Inc.


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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