Another Big 737 Max Win for Boeing - Analyst Blog

Commercial aerospace behemoth The Boeing Co. BA has won a sizable firm order form Canada's largest airline, Air Canada, for a total of 61 Boeing single-aisle jets, worth $6.5 billion at list prices.

The contract includes the delivery of 33 737 Max 8 and 28 737 MAX 9 jets, with Air Canada having options and rights on an additional 48 aircraft. The first 737 Max flight is due in 2016, with first deliveries scheduled to begin from the third quarter of 2017. This deal would complete the first phase of the airline's narrow-body fleet renewal plan and generate significant cost savings.

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 seats besides providing extra leg space. This aircraft is 14% more fuel efficient as well as lessens operational noise by 40% than its closest peer in the single-aisle aircraft market. Boeing's 737 MAX has gathered over 1,900 orders to date from 37 countries worldwide.

Recently, Boeing won another substantial 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. The jets – slated for delivery between 2015 and 2021 – will perk up route services between Germany and several destinations in Turkey.

Boeing has also received an order 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.

Continuous order flows are a testimony to Boeing's dominance in the flourishing commercial airplanes market. Indeed, this commercial aerospace behemoth is flying high on the back of rising demand for its new fuel-efficient commercial planes. Last year, it reported record jet deliveries, beating its own projection, driven by strong commercial numbers. The heightened deliveries were also a function of an increased production rate.

Boeing currently has a Zacks Rank #3 (Hold). Other well-placed players in the aerospace and defense industry include Huntington Ingalls Industries, Inc. HII, Wesco Aircraft Holdings, Inc. WAIR and General Dynamics Corp. GD. Huntington Ingalls and Wesco Aircraft carry a Zacks Rank #1 (Strong Buy) while General Dynamics holds a Zacks Rank #2 (Buy).