The Boeing Company (BA) decided to spur the production rate of its 777 airplanes again to cope up with the increasing demand for this variant. Boeing will increase the production rate to 8.3 airplanes per month in the first quarter of 2013.
Citing a hike in demand, Boeing has already increased the production rate of 777 airplanes once in March 2010. The production rate was upped from 5 airplanes per month to 7 airplanes per month from Mid-2011.
The 777 airlines model is popular among airline operators since its launch in 1995. The cause for its popularity is its light weight, almost 19% lighter than its closest peers, and low fuel consumption. This airplane is also environmentally friendly emitting 22% less carbon dioxide per seat, and is operationally cheaper by 20% than peers.
As of December 14, 2010, net orders received by Boeing for 777 stands at 46 airplanes. The biggest order came from Emirates Airlines for 30 airplanes. The delivery of 777 through the first eleven months of the year touched 66 airplanes, making it the company’s second highest selling model.
The commercial market space is showing gradual signs of improvement and the recent survey of The International Air Transport Association (IATA) forecast 2010 global passenger traffic to grow by 8% year over year. To meet the increasing demand, going forward, Boeing, in September 2010, increased the production rate of its Next-Generation 737 to 38 airplanes per month from the second quarter of 2013.
As of December 14, 2010, total net orders received by Boeing for its commercial airplanes stands at 482 airplanes, with the highest orders received for 737 airplanes followed by 777 airplanes, while the net orders for 787 airliners are in the negative.
Increased production rate of 777 airplanes will not have any material impact on 2010 financial results. The Zacks Consensus Estimates for fourth quarter fiscal 2010, fiscal year 2010 and fiscal year 2011 are a respective $1.11, $3.99 and $4.62 per share.
Boeing currently retains a Zacks #3 Rank (short-term Hold rating). The positive catalysts for the company are its order backlog and strong booking. However, the delay in delivery of 787 airplanes continues to be a cause for concern. We maintain a Neutral rating on the company.
Based in Chicago, Boeing Company designs and produces commercial airplanes, defense systems and civil and defense space systems. The major competitors of the company are General Dynamics Corp. (GD), Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC).
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