Boeing Wins its First African Deal for 737 Max - Analyst Blog

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The commercial aerospace major The Boeing Co. BA won its first order from an African airline, Comair Limited, for its new 737 Max line of single-aisle jets. Boeing had listed the Comair sale on its web site in December last year, but did not disclose the name of the client then.

Comair – the parent company of South Africa's Kulula.Com airlines and also the franchise partner of British Airways – ordered eight of Boeing's 737 Max 8 airliners in a deal valued at $830 million at list prices. This Johannesburg-based airline operates in its local and regional Southern African routes and currently flies an all-Boeing fleet of 25 Classic and Next-Generation 737s on its kulula.com and British Airways brands.

With the latest order for the 737 Max 8s, Comair will have a total of 12 737s on order from Boeing. Comair has existing orders for four 737-8 aircraft. This deal for eight 737 MAX 8s will enable Comair to expand and renew its existing fleet. The planes will be delivered from 2019 through 2021.

The fourth generation of the 737 family – the 737 Max – is a premier aircraft from Boeing's stable and sees brisk demand in the single-aisle market for its fuel efficiency and low carbon dioxide emissions. Powered by the Commercial Fan Motor (CFM) International LEAP-1B engines, the Advanced Technology winglet of this airplane also enhances performance.

Additionally, the pivoting overhead stowage bins increase cabin space. The bins give passengers more room to keep a carry-on roll-aboard near their own seat besides providing extra leg space. This aircraft is 14% more fuel efficient than its closest peer in the single-aisle aircraft market.

The 737 MAX is also witnessing rising demand due to the expansion of air services in China, India, Indonesia, Turkey and several other emerging countries. The foray into Africa is the latest feather in Boeing's cap as the low-cost carrier business gains popularity in the developing regions of the world.

In February, Boeing won a sizeable firm order form a joint venture between Lufthansa and Turkish Airlines – SunExpress – for a total of 40 Boeing jets, worth $3.8 billion at list prices. The contract includes the delivery of 25 Next Generation 737-800 and 15 737 MAX 8 jets, with SunExpress having an option to buy an additional 10 737 MAX 8 aircraft.

In January, the company also won a contract, valued at $3.9 billion at list prices, from GE Capital Aviation Services (“GECAS”), the commercial aircraft leasing and financing unit of General Electric Company GE. This big order consists of 40 medium-haul passenger jets, evenly split between the two models, the 737 MAX 8 and the Next-Generation 737-800.

Again, the company won a contract recently to supply 16 737 MAX airplanes to IcelandAir. The initial order for 12 aircraft received in Dec 2012 has been increased to 16. The agreement also includes purchase rights for eight more 737 MAXs. The total value of the 16 airplanes will be $1.6 billion at list prices.

Even though Boeing is faced with many media-hyped glitches, the fact remains that this aerospace and defense leader is flying high on the back of rising demand for its new fuel-efficient commercial planes. It reported record jet deliveries in 2013, beating its own projection, driven by strong commercial numbers. The heightened deliveries were also a function of an increased production rate.

Boeing presently carries a Zacks Rank #3 (Hold). There are other companies in the sector that appear more promising and are worth accumulating now. These are Zacks Ranked #1 (Strong Buy) Huntington Ingalls Industries, Inc. HII and Wesco Aircraft Holdings, Inc. WAIR.
 



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WESCO AIRCRAFT WAIR: Free Stock Analysis Report

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