Boeing (NYSE:BA) is the world’s largest commercial plane maker. Being one of the two major aerospace giants, it’s constantly on its toes to defend its position and beat competition. Presently the company is focused on remodeling existing aircraft to serve the mounting needs of the airlines who are demanding efficient jets that shall consume lesser fuel and release lesser carbon to meet environmental needs.
After losing billions in the 787 Dreamliner, Boeing has decided to re-engineer on a ready platform that would cost much less, and at the same time invite lesser complications. Thus, Boeing is creating the successor of its best selling wide-body aircraft the 777, called the 777X.
The American aerospace major has had five decades long relation with Japanese suppliers who manufacture component parts for the planes. For its iconic 777X as well, Boeing is following the conventional route of collaborating with Asian part makers, and has thus persuaded five Japanese component makers to build parts of the airplane. The top quality parts and on-time deliveries made by overseas suppliers are among the major reasons why Boeing keeps getting back to them for any new aircraft that it plans to launch.
- Warning! GuruFocus has detected 4 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
According to the latest agreement with these partners, Boeing would get around 21% of 777X’s structural components from them. The parts would include wings, cargo, passenger and landing gear door, fuselage section, and the center wing.
The 777X has already created lot of hustle and bustle among global airline operators who are extremely keen on replacing their current wide-body fleet with the remodeled aircraft. Moreover there are several airlines that are looking for the expansion of their fleet in the future in anticipation of robust demand across the globe.
Boeing boasts of 777X’s fuel efficiency. The jet maker has already partnered with General Electric’s (NYSE:GE) engine making arm, GE Aviation, for making next generation fuel efficient engines for the plane.
Posing Threat To Airbus
Boeing and Europe-based Airbus (EADSY) have always been at loggerheads with neck and neck competition. The 777X will be available in two versions: the 777-8X, and the 777-9X the prices of which are kept around $250 million and $277 million, respectively. With its new fuel efficient jet, Boeing is poised to give strong contest to its rival’s offerings. It is expected to displace a portion Airbus A350’s market share.
The 777X has already recorded orders for 259 aircraft from four airlines. However, Boeing would have to ensure to make the airplane enter service on scheduled as planned for 2020, and be cautious of pitfalls such as delay in production.
The jet maker claims that the 777X would be about 12% more fuel efficient than competing jets (Airbus A350), and account for 10% lower operation cost. This is a big draw for airlines. But having said that, Boeing needs to be extra careful regarding Airbus’ response. It goes without saying that the latter would retaliate and come out with a long haul plane to contend the 777X.
CEO of Boeing’s commercial plane division Ray Conner is very optimistic about the company’s association with Japanese suppliers and believes that the partnership “will endure for many, many years to come.” Boeing has a solid wide-body plane in the lineup, and wide-body jets have wider profit margins. With the assistance of Japanese part makers Boeing is set to make a remarkable offering in the near future and post higher growth.