Boeing‘s (NYSE:BA) impressive portfolio of current and future commercial airplanes cover every market segment and will drive its future growth. With the 737 series, 747-8, 777 family of aircraft and 787 Dreamliners, Boeing has a much broader product lineup than its European rival – Airbus – which depends on the A320 family of aircraft, A350 and A380 for a share of the global commercial airplane market.
Additionally, Boeing’s strong focus on research and development has enabled it to launch more fuel efficient airplanes across segments to meet this major demand of airlines. Fuel costs constitute around a third of an airline’s total operating costs, and so the induction of more fuel efficient airplanes remains a priority for them. Boeing’s 737MAX, 787 Dreamliners and 777X offer anywhere between 10% and 20% fuel savings on their previous versions and as anticipated have driven strong growth in the company’s order book in the recent years. Through July 2013, driven by these leading airplanes, Boeing’s undelivered order backlog rose to 4,800 commercial airplanes, equivalent to around eight years of production at current rates.  To make timely deliveries against this huge order book, the company is raising the production rates for many of its models.
In all, the customer-focused, broad product portfolio coupled with a rising production rate will enable Boeing to take a lion’s share of the growing commercial airplane market driven by increasing demand for flights worldwide. In its current market outlook, Boeing forecasts delivery of over 35,000 commercial airplanes worth $4.8 trillion to airlines globally over the next two decades. 
We currently have a stock price estimate of $98.10 for Boeing, around 5% below its current market price.
Single-Aisle Segment Drives Delivery Volumes
In the single-aisle segment, which includes airplanes that seat around 90-220 passengers, Boeing’s 737 series competes neck-to-neck with Airbus’ A320 family of aircraft.
Currently, Boeing’s 737-700, -800 and -900ER models constitute a majority of its deliveries in this segment. However, over time the 737MAX, which is scheduled to enter service in 2017, will replace many of these models. Through July 2013, the 737 series had a combined undelivered backlog of nearly 3,500 airplanes.  Comparing this to Boeing’s total undelivered backlog of 4,800 airplanes, it becomes clear that single-aisle 737s drive delivery volumes of the company. Recently, Boeing also hiked its 737 production rates to 38 airplanes per month and plans to further raise this to 42 per month next year.
In comparison, Airbus already produces its single-aisle A320s at a rate of 42 airplanes per month. Undelivered backlog for the A320 family of aircraft also exceeds that for the 737 series with more than 4,100 undelivered A320s as of July 31, 2013.  Thus, in the single-aisle segment, Airbus holds a lead over Boeing.
Boeing Holds Clear Lead In The Twin-Aisle Segment
However, the battle tilts in Boeing’s favor in the twin-aisle segment, which includes airplanes that seat over approximately 230 passengers. Boeing has a much broader product portfolio than Airbus in this segment, and taking into account future airplane models the company is expected to maintain its lead for the foreseeable future. Additionally, even though the single-aisle segment constitutes nearly 70% of global airplane delivery volumes, in value terms, twin-aisle and single-aisle segments are nearly equal due to higher prices of twin-aisle airplanes. This is also highlighted from Boeing’s long-term market forecast, which says that of the $4.8 trillion global commercial airplane deliveries over the next two decades, around $2.5 trillion will be constituted by twin-aisles and around $2.3 trillion will be constituted by single-aisles. 
Looking at Boeing’s offerings in the twin-aisle segment, in the 250-400 passenger seat segment, Boeing’s 777 and 787 Dreamliner franchises completely out sell Airbus’ A330 and A350 product lines. Development of upgraded 777 – 777X – which is expected to offer 20% improved fuel efficiency on today’s 777, and the recent launch of a larger Dreamliner – 787-10 – will further strengthen Boeing’s hold in the twin-aisle segment. However, in the over 400 passenger seat segment, Airbus’ double-deck A380 holds the lead over Boeing’s 747-8. Overall, the combined undelivered order backlog for Boeing’s twin-aisle airplanes exceeds 1,300 through July 2013, compared to under 1,100 undelivered orders for Airbus’ twin-aisles.  
Beyond the intense competition between these two players, both Boeing and Airbus are benefiting from rising global demand for airplanes. Airlines in the developed regions are replacing their old aging fleets with new airplanes which is driving demand from these regions while airlines in the emerging regions are adding capacity to their networks to cater to the rising demand for flights which is driving demand from these regions. In the current year, driven by these trends, we anticipate global commercial airplane deliveries to rise to around 1,480 from around 1,410 last year.
Of these, Boeing expects to constitute around 635-645 deliveries, up from 601 in 2012.  The commercial airplanes business constitutes around 60% of Boeing’s total sales.
Government’s Spending Cuts Weigh On Boeing’s Defense Business
The remaining portion of Boeing’s business consists largely of the development, production, and sale of defense equipment and services. The company is the second largest defense contractor to the U.S. government after Lockheed Martin (NYSE:LMT) and more than 80% of its defense sales come from the government. Due to this high degree of exposure, Boeing is facing headwinds from government’s budget cuts especially across-the-board spending cuts, called sequestration, which came in effect from March 1, earlier this year.
In the near term though, we anticipate the impact on Boeing from lower government defense spending to be more than offset by growth from commercial airplane deliveries. The company also anticipates a similar trend and accordingly forecasts its 2013 top line to rise to $83-$86 billion, from $81.7 billion in 2012, and its 2013 earnings to lie between $5.10 per share and $5.30 per share, compared to $5.11 per share in 2012.  Notes:
- Boeing’s unfilled orders by model, August 12 2013, www.boeing.com [↩] [↩] [↩]
- Boeing forecasts demand for 35,000 new airplanes, June 11 2013, www.boeing.com [↩] [↩]
- Airbus’ order and deliveries, August 12 2013, www.airbus.com [↩] [↩]
- Boeing’s Q2 2013 earnings form 8-K, July 24 2013, www.boeing.com [↩] [↩]
- Boeing’s 2012 10-K, February 11 2013, www.boeing.com [↩]