The rivalry in commercial aerospace between goliaths The Boeing Company (BA) and EADS, the European owner of aircraft maker Airbus, got hotter at the just concluded 49th Paris Air Show in Le Bourget. Airbus was able to clinch orders and commitments worth $72.2 billion outscoring Boeing’s $22 billion.
The Paris Air Show clearly indicates that the ever-increasing fuel cost has tilted customers towards more fuel-efficient Airbus’ A320neos in preference to Boeing’s 737s. The changed scenario puts more pressure on Boeing, which is yet to determine whether to re-engine the 737 that could enter service in the 2017 timeframe or introduce a transformational new airplane by 2020.
At the Air Show, Airbus secured about $72.2 billion worth of business for a total of 730 aircraft. The company received commitments for 312 aircraft worth $28.2 billion and firm purchase orders for 418 aircraft worth around $44.0 billion.
Airbus has received an unprecedented volume of A320neo orders and commitments at the Air Show, due mainly to the fuel-efficient version of its single-aisle jetliner family. The company secured about 667 commitments worth some $60.9 billion for its A320neo alone.
With these new orders, the A320neo family backlog has now reached 1,029 units, since its launch in December 2010. The A320neo has clearly emerged as the best selling airliner in the history of commercial aviation, though the planes will only be delivered starting 2015.
Apart from the A320neo, Airbus has also received 34 commitments for the A320 family worth $2.8 billion, commitments for 11 A330s worth $2.4 billion, six A350s worth $1.6 billion and 12 A380s worth $4.5 billion.
Airbus peer, Boeing said it has received orders and commitments worth around $22 billion for 142 planes. Boeing has received commitments worth $4.7 billion for fifteen 747-8 Intercontinentals from an undisclosed customer, and another $4 billion for fourteen 737-800s plus four options, five 777-300ERs and four 787-9s.
We believe, Boeing is among the best-positioned companies in its sector due to its balanced exposure to commercial aircraft and defense equipment. Furthermore, the company is well positioned to benefit from the gradual recovery of the global economy and improving freight and passenger traffic. However, we believe the above positives are already priced in the current valuation, leaving very little room for any upside in the near-term.
The major competitors of the company are General Dynamics Corporation (GD), Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC). We maintain our Neutral rating on the Zacks #3 Rank (Hold) stock.
