Boeing’s (NYSE:BA) 777X may have built a very formidable base for the company, but the things don’t seem to be all good for the company. The aero-giant faces strict competition from commercial airplane makers like Embraer, Bombardier and the Chinese Comac which are consistently increasing their market shares and are eating into Boeing’s pie. At the moment, BA leads the market for the airplanes having a capacity of 100 passengers. However, this might soon change as the market has seen new competitors in the same space which are doing exceptionally well.
The company currently witnesses excellent growth in sales and profits emerging from higher commercial airplane deliveries arising from high demands. It is therefore left to be seen whether Boeing maintains its run in China as the Chinese government –run Comac is fast gaining pace in the Sino-Siberian market. The effects of this might not be immediately visible on Boeings global market as it is the leader in the US which is the world’s largest commercial market.
- Warning! GuruFocus has detected 3 Warning Signs with BA. Click here to check it out.
- BA 15-Year Financial Data
- The intrinsic value of BA
- Peter Lynch Chart of BA
The Bombardier Beasts Are Here:
What’s an even bigger thing to worry is that the local jet manufacturers like Embraer and Bombardier are coming out with planes bigger in size than BA’s 737s. What comes out is the second generation of E-jets which are being designed to seat more than 110 passengers slated to enter service by 2018. Next up, are Bombardier’s new CSeries airplanes which are set to make their first appearance by the second half of next year.
Another thing to worry for Boeing is the fact that these new airplanes which have significantly low prices will start creating a lot of pressure on Boeing. For instance, Bombardier’s largest CSeries model, with a seating capacity of around 130 passengers comes at a list price of $71 million. In comparison, Boeing 737MAX-7, which has a similar seating capacity, comes at a list price of $85 million. This might have a huge impact on Boeing’s market shares.
The next threat to Boeing is China’s government-owned Comac. The company’s C919 variant has already been doing crazily well not only in China but in the West too where the Chinese aircraft leasing companies have booked a huge number of aircrafts from the company.
This competition, the analysts feel, will have a positive impact on the overall markets for the airplanes. These new entrants into the market will increase the overall global economic activity in the aero-industry. This coupled with liberal markets over the world might generate increased orders for Boeing. This could either be because of the market goodwill that the aero-giant enjoys or they might simply come out with something that could challenge these challenging market conditions. Whatever be done, Boeing’s not a new kid on the block which cannot face the market stringencies and that it will definitely bounce back and with full force. The stocks are performing quite well and there is ample in store for the investors.