Boeing (BA) Secures $11B Order For 75 737-MAX Airplanes

The Boeing Company (NYSE:BA) has secured an order from Avolon — the international aircraft leasing company — for 75 of its 737-MAX airplanes. Following the signing of memorandum of understanding at the Paris Air Show in June, the deal has been finally awarded during the 2017 Dubai Air Show.

Order in Detail

The agreement comprises an order for 55 MAX 8 and 20 MAX 10 airplanes — the newest and largest member of the 737 MAX family — including purchase rights for 20 additional MAX 10 jets.

Valued at nearly $11 billion at current list prices, the deal represents the largest single order till date that the company has placed with Boeing. Given the size of the deal, Avolon is expected to get a discount on the list price of the aircraft.

With this latest aircraft deal, Avolon’s position as a leading lessor in the global commercial aviation market is likely to be strengthened. Currently, this Dublin, Ireland-based company has over 140 MAX aircraft in its owned and committed fleet, and expects MAX family airplanes to continue boosting its customers’ profit in their businesses, going forward.

Deals Inked at the Ongoing Dubai Air Show

Demand for Boeing’s commercial airplanes has been rising owing to a steady increase in passenger and freight traffic.

Of late, at the Dubai Air Show, this aircraft giant received an order from the Kuwait-based ALAFCO Aviation Lease and Finance Company for 20 additional 737 MAX 8s, valued at $2.2 billion. Additionally, the company secured an order for five more 787-8 Dreamliners and a commitment to purchase two large freighters, valued at approximately $1.9 billion, from Azerbaijan Airlines.

Apart from this, the company sealed a deal for delivering 40 787-10 Dreamliners to Emirates, the largest airline in the Middle East. The purchase order also comes with equipments related to the 787-10 fleet, valued at $15.1 billion.

Given the enormous commercial demand in the market, Boeing is witnessing significant progress, especially in the single-aisle market.

Global Demand for Single-Aisle Aircraft

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

Moreover, the company expects single-aisle jets to be the major driver behind the increase in demand, 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 (PA:AIR) SE’s (OTC:EADSY) A320neo is expected to pose significant challenges. Recently, Airbus received an order for 430 single-aisle airplanes valued at $49.5 billion at the Dubai Air Show.

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 commercial aerospace market, this aerospace behemoth continues to invest in research and development for upgrading and churning out upgraded versions of its existing planes.

Notably, the 737 model is the fastest-selling airplane in Boeing’s history, exceeding 4,000 total orders from 92 customers. The latest order that Boeing won from Avolon will aid the 737 model to maintain its leading position in the single-aisle jet market, going ahead.

Price Movement

Share price of Boeing has surged 68.5% over the last 12 months, outperforming the broader industry’s gain of 34.9%. This could be because the company’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, ongoing share repurchases as well as earnings accretive acquisitions.

The stock also performed better than that of General Dynamics Corporation (NYSE:GD) and Lockheed Martin Corp. (NYSE:LMT) , which missed the industry mark.

Zacks Rank

Boeing 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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