The Boeing Company (BA) has signed an agreement of intent with OAO Aeroflot, the Russian flag carrier and largest airline based on passengers carried in Russia. Per the agreement Aeroflot will buy eight each B777-200ER and B777-300ER series aircraft with options to purchase four B787 Dreamliner series aircraft.
The agreement is sort of a coup for Boeing having garnered a greater foothold in a market with a small presence compared to its peers – Airbus and Ilyushin.
Headquartered in Chicago, Boeing is a premier jet aircraft manufacturer and one of the largest defense contractors in the U.S. The company’s customers include domestic and foreign airlines, the U.S. Department of Defense, the Department of Homeland Security, the National Aeronautics and Space Administration, other aerospace prime contractors and certain U.S. government and commercial communications customers.
Boeing is the largest aircraft manufacturer in the world in terms of revenue, orders and deliveries, and the second largest aerospace and defense contractor. Also its revenue exposure is spread across more than 90 countries around the globe. Demand for Boeing’s Commercial Airplanes, due to the continuing recovery of the global economy, is emanating from a steady improvement in passenger and freight traffic.
To catch up with the expected rise in air traffic and to check fuel bills, airliners will need to replace older airplanes with new ones. The company expects U.S. and Canadian airliners alone to invest about $700 billion for fleet extension over the next 20 years.
Going forward, the grass for Boeing appears greener with bullish prospects expected worldwide. The International Air Transport Association (IATA) forecasts 2010 global passenger traffic to grow by 8% year-over-year. Also, air cargo traffic is rebounding, growing 24% in the first half of 2010 driven by Asian exports.
IATA anticipates a 20% cargo traffic growth in 2010. Going by recent trends, the prospect for the commercial airplanes segment of Boeing is looking brighter, as the company ended the third quarter of 2010 with 3401 airplanes at an estimated value of $255 billion. However, the constant delay in first delivery of 787 airplanes remains a cause of concern.
The Boeing Company currently retains a Zacks #3 Rank (short-term Hold rating) in line with its major peers like Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC).
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