Boeing and Airbus jets

It’s All Coming Together For Boeing

Airbus Boeing

I remember about a year ago when one of the main concerns about Boeing was that it was trailing Airbus’ backlog and that this very factor could be a sign that Boeing was losing the great race between the two companies positioned at the opposite sides of the pond. Back then, BA’s stock traded at about $120 per share and the 787 Dreamliner was still recovering from a number of high-profile battery malfunctions that left the company’s pristine image tainted. Even earlier this year, the death of the Ex-Im Bank raised questions about the American airplane manufacturer’s ability to persevere without what many referred to as “Boeing’s Bank”. And to top it all off, the Chinese economy took a massive nosedive this year which raised questions about many companies’ futures, including that of Boeing’s.

But now that the dust has settled Boeing has proven itself to be a champion of perseverance. That’s not to say that the company still does not have its fair share of problems, but after going through all that it went through over the past year, it goes to show how important strong fundamentals can be in a company’s growth.

Deliveries went up by 7% this quarter as compared to the same quarter last year and the backlog has swelled to nearly 5,700 commercial airplane orders. That being said, let’s take a look at what Boeing has to offer in the years to come and what are some of the issues it might face.

Duel with Airbus

Both Airbus and Boeing form one of the greatest duopolies we have ever seen and it’s no wonder why everyone keeps bringing up their competition in any evaluation, and rightfully so. However, opinions tend to lean towards which side of the Atlantic you live on.

Yes, it is true that Airbus’ backlog is far larger than that of Boeing’s with 6,755 aircraft by the end of September. The European giant even recorded higher profits this year by posting a 34% rise half-year profits on a 6.22% rise in revenues. See a large portion of this gain was made from the sale of Airbus’ 17.5% stake in Dassault Aviation, the French jet maker.

Though a word of caution: according to a report published last year by IATA, China, the US, India, Indonesia and Brazil are going to be the fastest growing markets in the next 20 years in that order. Why this is important stems from the fact that Airbus has an upper hand in the Asian Pacific region since the company generated nearly 32% of its revenue last year from the segment.

The Sun Rises in the East

Things took a juicy turn for Boeing last month when China signed a massive $38 billion deal with the Chicago-based airplane manufacturer. The lucrative deal was met with skepticism as people questioned the part of the deal which stated that Boeing has to open airplane completion and delivery centers in China. Not surprisingly, workers back home were not happy to find out that their company was opening up a workshop in a country known for its cheap labor. However, things calmed down once Boeing executives reassured their workforce that the plants being opened in China are not going to threaten their jobs since the Chinese facilities will only finish and paint the narrowbody 737 planes built at its Renton, Washington factory.

Then there are those who believe that China is going to capitalize on Boeing’s decision to open up a plant in the Mainland by learning whatever they can to help their Comac C919 endeavor. To be fair, that plane is supposed to be the Chinese commercial airline industry’s flagship aircraft, but the constant delays and Boeing’s strong market presence makes it a very unlikely threat.

Regardless of a third competitor showing up to combat Boeing and Airbus, the fact is that China will need approximately $1 trillion worth of new planes in the next two decades and that’s enough pie to go around.
A Strong Foundation for a Big Structure

What sets Boeing apart from Airbus is its ability to realize its sales through delivery. So far, Boeing has outpaced its European rival when it comes to deliveries, making 503 deliveries by the end of August this year as compared to Airbus’ 397 deliveries. Boeing’s deliveries are now expected to reach 755 to 760 planes this year, as it managed to deliver 199 commercial planes this quarter, up from 186 deliveries during the same quarter last year.

he American airplane manufacturer even has the record to prove that they will be able to sustain the growth in the years to come. Its introduction of the automated process at the Seattle factory, which develops parts for its 737 model, reduces manufacturing time by 30%. It seems more than likely that the company will be able to achieve its production rate target of 52 planes a month by 2018.

There were fears that the death of the Ex-Im Bank would dent Boeing’s ability to compete with its European counterparts; however, so far, things seem to be tilting in Boeing’s favor. Although, it is too early to conclude how strong the Ex-Im Bank’s demise is going to affect Boeing. If Boeing can procure the same (or greater) number of orders in the coming year as it did in the year before, then we’ll know for sure how important the charter really was to the company.

Continues at… It’s All Coming Together For Boeing

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