Last week, the champagne corks were popping at Boeing. The US aircraft manufacturer’s share was one of the best performers and had shot through the roof on Wall Street. At USD 243.02, the stock reached a new 52-week high. In addition, the manufacturer registered a number of new orders from airlines and laid the foundation for joint ventures in India and Ethiopia.
Higher production equals pretty cash flow, equals better profits
Is this the turnaround? This question from analysts and market observers will probably only be answered after the financial statements are presented for fiscal 2023 and the following year. At present, however, the U.S. frame maker is experiencing an upswing, possibly ending a long period of setbacks. The B737 MAX, for example, turned into a billion-dollar disaster in recent years, and construction of the new B777-X long-haul jet has been delayed time and again because of technical issues and missing components. Now the company speaks of 2025 as the date for its planned delivery. Nevertheless, in a CNN interview last week, Jim Lebenthal of market analyst, Cerity Partners, spoke of a “multi-year turnaround” in view of the steeply rising share price which is well on track. Because they increased the production rate of their MAXes, and their B787 variant is running extremely well: “Higher production equals delivery, equals pretty cash flow, equals better profits and paydown on debt,” Lebenthal reasoned.
Filled order books
And indeed, Boeing is doing extremely well, at the moment. Last week, the Australian airline, Qantas, placed a firm order for twelve Boeing B787s in addition to twelve Airbus A50-100s. Earlier, Air India had ordered 30 long-haul jets (20 of the B787 and 10 of the larger B777X variant), in addition to 190 B737 MAX medium-haul aircraft. The carrier also signed options for 70 more Boeing aircraft, so the total order could add up to 290. At the same time, national Indian competitor, IndiGo, announced plans to purchase 25 Boeing 787 Dreamliners and 10 B777X. In Indigo's case, however, Boeing competitor Airbus secured the lion's share of its order, with a total of 500 A320 / A321s.
New strategic approach
Beside growing production figures, Boeing management has set the course for a new diversification strategy. This is illustrated by three examples. The company has announced that it will be investing USD100 million in infrastructure and programs to train pilots in India. The development comes along with a flurry of contracts signed by U.S. and Indian companies on the sidelines of Prime Minister, Narendra Modi's latest meeting with U.S. President, Joe Biden, in Washington on 21JUN23. However, the New Delhi government wants more. It urges Boeing to set up an assembly line for some of its models in India, comparable to Airbus’ A320/A321 plant in Tianjin, China. The U.S. frame maker has not yet reacted to this request, at least not officially.
ET and Boeing establish JV to produce components…
On 19AUG23, Boeing and Ethiopian Airlines, Africa’s largest carrier, announced plans to establish a joint venture to jointly manufacture aircraft parts. The initiative comes with an initial investment of USD15 million, as revealed by Addis Ababa’s state investment authority. The JV is set to encompass the production of various aerospace components, including aircraft thermal-acoustic insulation mats, electrical wiring harnesses, and other essential parts.
… while Boeing and Joramco plan P2F conversions
Only three days later, on 22AUG23, Boeing and Jordanian MRO provider, Joramco, told media that they intend to partner to establish a P2F conversion line at Amman Airport. According to Aviation Week, the line will focus on Boeing 737-800 passenger-to-freighter (P2F) conversions. Joramco said that it will be the first MRO supplier in the Middle East to convert Boeing aircraft. Once established, the operation will support future B737-800BCF customers operating across the Middle East, Europe, North Africa, and Central Asia (CIS).
The step is backed by data published by Boeing in its latest Commercial Market Outlook 2023-2042. In the study, Boeing forecasts the global freighter fleet to grow by 65% until 2042, totaling more than 3,700 aircraft. Major prerequisite is that 2,800+ production and converted freighter deliveries are required until then, including roughly 1,300 standard-body freighter conversions.
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