Boeing (BA), as announced yesterday, will be delivering six additional Boeing 777-300ERs (extended range) to Cathay Pacific Airways, one of the world’s leading jetliner operators. The Hong Kong-based carrier exercised its purchase rights making this the fourth consecutive addition to its acquisition and plans for the long-range jetliner since 2005.
The additional airplanes purchased as part of the deal have been valued at approximately US$1.6 billion and increase Cathay Pacific’s 777-300ER future fleet from 30 to 36. The carrier is impressed with the aircraft’s operating economics and minimal environmental impact.
Cathay Pacific is a long-time Boeing customer. Excluding the 777-300ER, the carrier operates 12 Boeing 777-300s and five 777-200s, while leaving out the 777s range (twin-engine, long-haul airplane range), it operates forty seven 747-400s in both passenger and cargo versions. Additionally, the carrier had ordered for ten Boeing 747-8 Freighters.
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 (DoD), the Department of Homeland Security, the National Aeronautics and Space Administration (NASA), other aerospace prime contractors, and certain U.S. government and commercial communications customers.
Boeing, with its exposure to both commercial aircraft and defense equipment, is in a favorable position to grow with the gradual recovery of the global economy. We believe freight and passenger traffic will improve going forward, leading to a recovery in the commercial aerospace market. Also, a $312 billion order backlog, strong order booking and a globally diversified customer base will help maintain the growth momentum.
However, in the near term, headwinds over 787 delays along with the expected cutbacks in the U.S. defense budget loom large over the current valuation of the company.
We currently maintain a Neutral recommendation for Boeing.
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