Boeing Has 'More Teeth,' Gabelli & Co Says

Aircraft manufacturing giant Boeing Co BA has finalized a new seat supplier, LIFT by Encore, for its BA 737NG and BA 737MAX airplanes. LIFT will be the only supplier selling directly to Boeing, while the company’s ten approved economy seat suppliers sell to the airlines.

Gabelli & Co’s James Foung maintained a Buy rating for the company, saying the move to appoint LIFT was another variation of Boeing’s Partnering for Success Program. He commented, “We think the LIFT seats are another variation of BA’s Partnering for Success program in which the company improves its operating margin by taking businesses back from suppliers.”

Boeing : Aiming To Avoid Supply Problems

Boeing’s motive in appointing a new supplier is to avoid supply problems like the ones faced by it last year. The company may also be able to improve its revenues and profits from the installation and the potential markup in the price of its aircraft, Foung noted.

Boeing’s decision to not renew its agreement with Spirit AeroSystems, in which Spirit makes aftermarket parts for the company’s proprietary products, is also aimed at improving earnings.

“Finally, we believe these actions serve as a warning to its suppliers that if BA is not able to get the necessary price concessions from the Partnering for Success program, then the company could make the parts in-house or purchase them from a lower cost supplier,” the analyst mentioned.