Weekly Aviation Note: Boeing And GE

+34.87%
Upside
192
Market
259
Trefis
BA: The Boeing Company logo
BA
The Boeing Company

The past week saw important developments related to two aviation companies under our coverage. During the week, Boeing (NYSE:BA) notched up orders and commitments for airplanes exceeding $100 billion at the Dubai air show from Middle-Eastern carriers. [1] These orders will help the aircraft manufacturer close the gap with Airbus which has so far led in new airplane orders this year. GE (NYSE:GE), which makes engines for many Boeing and Airbus airplanes, also bagged engine orders and commitments worth $40 billion (including orders received by CFM International which is a 50/50 joint venture between GE Avaition and Snecma of France) at the Dubai air show, which ended during the week. [2]

Boeing

Boeing’s impressive order tally at the Dubai air show was driven by the launch of its wide body 777X. Three Middle-Eastern airlines – Emirates, Qatar and Etihad – ordered 226 of this newly launched airplane to make up the bulk of Boeing’s 342 orders and commitments received at the air show. The aircraft manufacturer’s remaining orders were for its 787 Dreamliner (30) and narrow body 737s (86). [1]

Relevant Articles
  1. Should You Pick Boeing Stock At $190?
  2. Having Lost 15% So Far This Year, Is Boeing Stock Undervalued At $210?
  3. Will Boeing Stock Recover To Its Highs of Over $250?
  4. Following A 39% Rise This Year Is Boeing Stock A Better Pick Over Caterpillar?
  5. Is Boeing Stock Undervalued At $190?
  6. Here’s What To Expect From Boeing’s Q2

This massive haul at the Dubai air show will help Boeing catch up with Airbus in new airplane orders received this year, provided its commitments convert to firm orders before the end of the year. Of the 342 orders and commitments received by Boeing at the air show, only 56 are firm orders while the remaining are commitments. Nonetheless, these orders helped take Boeing’s 2013 airplane orders to 1,037 through mid-November. [3] In comparison, Airbus received orders for 1,215 airplanes through October end this year, up 14% from last year. [4]

On its part, although Airbus’ tally lagged behind Boeing’s at the Dubai show, it did receive sizable orders. The European aircraft manufacturer bagged orders and commitments for 160 airplanes worth $44 billion with a majority of these being orders and not mere commitments, which can be cancelled without financial penalties. [5] However, in our opinion, commitments received by Boeing at the Dubai air show will likely be converted to firm orders as details get finalized over the coming months.

Coming back to the large launch order received by Boeing’s 777X, in our opinion, this reduces the financial risk in the program and lays a very strong foundation for the plane’s development and production. The 777X is currently expected to enter service with airlines in 2020 with production starting in 2017. (See The 777X Strengthens Boeing’s Leadership Position In Large Commercial Airplanes)

Additionally, as the 777X received its large launch order from only four airlines, compared to many airlines making up the order, it is unlikely that Boeing will continue to see order inflows of such magnitude for the 777X over the coming months.

See our complete analysis of Boeing here

GE Aviation

Separately, GE too received orders and commitments for airplane engines and services worth $40 billion at the Dubai air show. The industrial conglomerate’s tally was driven by its new GE9X engine which was chosen by Boeing earlier in the year to power the 777X. This impressive showing at the air show will further raise GE Aviation’s backlog from $114 billion at the end of the third quarter. [2] In total, GE received orders for 450 GE9X engines at the Dubai show.

CFM International, which is an equal partnership venture between GE Aviation and Snecma of France, also received multiple orders for its LEAP engines which will power the next generation of today’s single aisle airplanes. After including orders received at the Dubai air show, orders for CFM’s LEAP engine crossed 5,800. [2] This engine has been chosen to power both the Airbus A320neo and Boeing 737MAX that are set to replace their corresponding current generation single aisle airplanes over the coming years. Thus, effectively, CFM’s LEAP is set to dominate the single aisle airplane market over the coming years. In all, the strong showing by both GE9X and LEAP at the Dubai show signify GE’s advanced and energy efficient airplane engine portfolio.

See our complete analysis of GE here

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:
  1. Boeing Launches 777X with Record-Breaking Orders, Strengthens Partnerships in the Middle East at the 2013 Dubai Airshow, November 20 2013, www.boeing.com [] []
  2. $40 billion for GE and CFM International and Dubai Show, November 19 2013, www.geaviation.com [] [] []
  3. Boeing’s 2013 orders, November 22 2013, www.boeing.com []
  4. Airbus’ orders and deliveries, November 22 2013, www.airbus.com []
  5. Airbus wins 160 orders and commitments worth US$44 billion at Dubai, November 20 2013, www.airbus.com []