Boeing’s Commercial Airplane Lineup Positions It Well For Growth

by Trefis Team
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    Quick Take
  • Boeing has a highly competitive commercial airplanes product portfolio covering every segment – from single-aisle to large twin-aisle – of the commercial airplanes market.
  • In the recent past, the aircraft manufacturer has also launched many new airplane models with enhanced fuel efficiency.
  • At the same time, Boeing is also raising its production rates to meet the growing global demand for commercial airplanes.
  • On the flip side, Boeing’s growth from commercial airplanes market is being offset in part by government’s defense spending cuts.

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. [1] 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. [2]

We currently have a stock price estimate of $98.10 for Boeing, around 5% below its current market price.

See our complete analysis of Boeing here

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. [1] 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. [3] 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. [2]

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. [1] [3]

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. [4] 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. [4] [5]

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

  1. Boeing’s unfilled orders by model, August 12 2013, [] [] []
  2. Boeing forecasts demand for 35,000 new airplanes, June 11 2013, [] []
  3. Airbus’ order and deliveries, August 12 2013, [] []
  4. Boeing’s Q2 2013 earnings form 8-K, July 24 2013, [] []
  5. Boeing’s 2012 10-K, February 11 2013, []
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  • commented 4 years ago
  • tags: LMT BA
  • oeing has 1,537 firm orders for the max vs 2,455 for the A320neo

    Boeing seeks factory in Charleston area for engineering, assembly of 737 MAX components

    Airbus raises 2013 order target to over 1,000 jets

    Boeing is being sue over fault and misleading claims over the 787
    The 787 was started on 3-28-2003 and ten years later only 83 787 has been delivery Boeing has yet to meet rate of 10 787 per months and the 747-8 has 111 order and 52 delivery and is two years late
    What Boeing does next will determine Boeing Future.
    Boeing may miss the boat if Boeing waits to offer the 737 MAX in 2017 (777-X in 2019 and the 787-10 TBD)
    Boeing is laying off its workforce and has sold off its Manufacturing Capabilities to other aircraft companies
    40% of Boeing workforce will be retiring over the next five years
    Boeing has yet to modernize its factories with automation to meet the world need of 35,000 new aircraft over the next twenty years

    Boeing The Current Market Outlook see
    Airbus Global Market Forecast 2012-2031 see
    Note Asia and Japan has had a Recession since 1997 and Boeing did not build the double-decker 747-500 & -600

    Average Fleet Age for Selected Airlines see

    Bombardier C-Series and Airbus is two years ahead of Boeing

    The Boeing product line is out dated the 747 was design in 1961, 737 in 1966, 757 & 767 in 1972, 777 in 1989, 737NG in 1997, 787 in 2003
    Boeing has yet to build the Yellowstone aircrafts

    Boeing has the 747-8, 777, 787, and 767 all in the market and the airlines rarely used these aircrafts on domestic route

    Boeing is not the only aircraft assembler in the world, Airbus A320, Bombardier C-Series, Comac C919, Irkut MS-21 and Embraer

    The irony about the A320, A330, A340, A350, A380 and the Kc-30 they are in production with parts being built in factories once own by Boeing
    The 777-X, 787-10 and 737Max are not

    Where is the market for the 777-X which as offer twice before alone with the 777-100 & combi in 1995 at the Pair air shown
    Boeing slows the pace on 777X see

    How many airlines will need a 777-X that can fly non-stop for 9,000 mile and carries 400 passengers?
    Air India and Jet Air are leasing out there 777
    Air India has decided to sell five out of its eight Boeing 777-200LR aircraft owing to changes in market dynamics due to the Global recession, steep increase in fuel prices and poor yields on non-stop routes,

    Boeing has 1,537 firm orders for the max vs 2,455 for the A320neo
    Boeing still must design and test all the 737 max parts and build flight test parts and flight test wing and build flight test 737max -7, 737max -8 and 737max -9 and there a FAA 18 month to 24 months flight test programs
    The 737 was design in 1966 that base on the 707 in 1958, that has been updated with turbo fan engines, glass cockpit and winglets in 1997

    The 737Max still has 17.2 wide seat, manual cargo loading systems no composite parts to save weight, the 737 max will need a redesign tail under body fairing, reinforce wing, new engine ploy and engines nacelle , longer landing gears, and reinforce aircraft undercarriage, all these improvement will add weight and the Renton airport only has 1000 feet long runway

    Airbus is two years ahead of Boeing with the A350 and A320NEO

    The 787 was start on 3-28-2003 and only 83 aircraft has been delivery the program is over 3.5 years late

    The 747-8 only has 111 orders 52 delivery, 2.04 Billions over budgets and two years late

    Many airlines are not replacing there exist Boeing aircraft, since Boeing CEO James McNerney, and GE CEO Jeff" Immelt are member of the board on the Import-Export Bank that made better loan to foreign airlines at a lower interest bank

    Delta, and other Airline Group have file law suits against The U.S. Export-Import Bank over Air India Loan Guarantees

    This may be the reason that airlines are ordering from Airbus
    Delta has already has orders with Boeing for 18 787s and Delta confirms plan to buy 100 Boeing 737s
    Delta Air Lines said on Wednesday that it will buy 40 more Airbus planes

    British Airways Poised to Dump Boeing

    British Airways Poised to Dump Boeing - 24/7 Wall St.

    Singapore Airlines likely to convert orders to A350-900 & -1000

    Lion Air orders 234 A320 Family aircraft › Press centre › Press releases

    American Airlines takes first of its 260 Airbus airplanes on order

    Airbus, ANA & JAL In Discussions For A350 Orders

    Air China Places Order for 100 Airbus SAS Aircraft
    Airbus wins $7 billion Philippine Air order

    its is time to give Boeing CEO his golden parachute retirement and the stock holder should loan the CEO a C-17 over one of the World's Active Volcanoes