The Boeing Company (BA) announced a sales agreement with Russia’s UTair Aviation for 40 Next-Generation Boeing 737 airplanes, comprising seven 737-900ERs and 33 737-800s. Boeing’s 737 Next-Generation airplanes will help UTair deliver an unmatched level of service for passengers and dramatically reduce operating costs, fuel costs and environmental impact.
UTair is one of the largest operators in Russia with a fleet of over 30 Boeing airplanes. In 2011, UTair became the first operator in Russia and Eastern Europe to fly the new Boeing 737-800s with the enhanced Boeing Sky Interior.
UTair operates the largest aircraft fleet in Russia consisting of over 200 airplanes including 21 Boeing 737-500, 7 Boeing 737-400s, 4 Boeing 757-200s and 2 Boeing 737-800s. By the end of 2011, UTair plans to increase its Boeing 737-800 fleet to nine airplanes.
Looking forward, Boeing expects the global market for commercial airplanes in the next 20 years would be approximately $4 trillion. The company estimates traffic to grow at 5.1% annually over the long term and the world airplane fleet to double by 2030.
The single-aisle market is expected to see strong demand around the world and consequently an increase in its market share. World commercial airliner fleet composition is expected to change significantly by 2030 with single-aisle jets making up 70% of the total fleet size versus 62% currently.
Boeing’s multi-trillion dollar outlook is fueled by robust growth in China, India and other emerging markets. China, which has experienced double-digit growth in gross domestic product in recent years, is forecasted to grow at 7% per annum; while South Asia, which includes India, is forecasted to grow at 7.1%.
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.
