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Boeing (BA) Secures 12 737 MAX Jets Order from Air Lease


Aircraft giant, The Boeing Company BA, has finalized an order for delivering 12 737 MAX airplanes to Air Lease Corporation (AL). Although details of the contract have been revealed recently, the order was announced during the Paris Air Show.

The deal comprises order for five 737 MAX 7s and seven 737 MAX 8s. It also includes two new orders for the 787-9 Dreamliner.

Notably, with this order Los Angeles, CA-based Air Lease Corporation’s total MAX orders reaches 130, and Dreamliner order reaches 49.

As a member of the Next-Generation 737 family, the 737-800, continues to be an extremely popular single-aisle aircraft. This is because of its advanced technology and low operation as well as maintenance costs.

The new 737s will feature the Boeing Sky Interior – the 787 Dreamliner inspired cabin – that provides passengers a sense of space with decorative sidewalls, larger windows, LED mood lighting and larger pivot overhead stowage bins.

Deals Inked at the Paris Air Show

Demand for Boeing’s commercial airplanes has been rising, owing to a steady increase in passenger and freight traffic. This has been more strongly reflected in recent times, when the aerospace behemoth successfully won a huge number of commercial contracts at the Paris Air Show.

In addition to the aforementioned deal, other notable contracts secured by Boeing at the Air Show include a commitment from the Kuwait-based ALAFCO Aviation Lease and Finance Company for 20 737 MAX 8s, valued at $2.2 billion at current list prices. Moreover, Lion Group is committed to buy 50 737 Max 10 jets from the company for $6.24 billion.

Also, Boeing signed a memorandum of understanding (MOU) with SpiceJet for 40 737 MAX airplanes worth $4.7 billion. Another MOU worth $2.5 billion was signed with Tibet Financial Leasing for 20 737 MAX airplanes. Again, the company signed an MOU with BOC Aviation Limited for 10 737 MAX 10 airplanes, worth nearly $1.25 billion.

Apart from this, Boeing clinched an order from AerCap for 30 787-9 Dreamliners, worth $8.1 billion. Given the huge commercial demand, this aerospace behemoth is expected to witness significant traction in the near term, especially in the single-aisle market.

Single-Aisle Aircraft in Demand

Boeing anticipates demand for 29,530 single-aisle jets, worth $3.2 trillion, in the next 20 years. This projected figure reflects a 5% increase over last year's projection.

Moreover, the company expects single-aisle jets to be the major driver of demand growth, comprising 72% of the total commercial jets’ demand projection. While the new 737 MAX and the 737-800 is likely to grab the lion’s share of the new orders, Boeing’s arch-rival Airbus Group SE’s EADSY A320neo is expected to pose significant challenges.

Nevertheless, Boeing’s 737 model remains one of the best-selling planes in the single-aisle market, thanks to its fuel efficiency and passenger comfort. Therefore, to maintain its dominance in the aerospace market, the company continues to invest in research and development for upgrading and churning out upgraded versions of its existing planes.

Q2 Order Details

Boeing’s second-quarter 2017 order details show that it booked 183 net commercial orders (accounting for cancellations) compared with 381 net commercial orders in the previous quarter.

On the contrary, Boeing’s rival, Airbus registered net bookings of just 203 aircraft in the same period, trailing far behind.

Notably, Boeing and Airbus are the two largest players in the commercial aircraft space and their direct rivalry is quite evident. This, in turn, leads to intensifying competition in the Aerospace–Defense industry.

Nevertheless, Boeing’s huge orders have won it a better position in the industry.

Price Movement

Shares of Boeing have rallied 77.1% in the last 12 months, outperforming the industry’s gain of 34.3%. This could be because the company’s strong balance sheet and cash flows that provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions. Additionally, the stock’s performance is in line with that of General Dynamics Corp. GD and Textron Inc. TXT that also surpassed the industry mark.

Zacks Rank

Boeing currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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