American aerospace behemoth Boeing (BA, Financial) is having a solid run this year in terms of orders bagged. The company is ahead of its European rival Airbus (EADSY, Financial) in the race of winning orders. Through the first 11 months of the year Boeing has booked net orders for 1,274 commercial airplanes, while Airbus has bagged 1,031 in net orders. The current year order tally is just the reverse of last year when Airbus was leading with 1,503 aircraft orders and the Chicago-based company was lagging behind with 1,355 units.
Now that the countdown for the new year has begun and plane makers are preparing to bid adieu to 2014, every order win is a bonus to the present order count.
A new order win delights Boeing
Air China confirmed its orders a mix of 60 Boeing 737s and 737 Max on Monday, which is worth more than $6 billion at list price. However, the actual payment will be less than the list price owing to the discount received from the aero major. The airline operator will make the payment of the aircraft utilizing cash from operations, loans from financial institutions, and other financing instruments. Considering that during the past decade Airbus has edged ahead of Boeing in the narrow-body market led by solid demand for the A320, this order win from China’s key carrier is quite a meaningful one for Boeing. Both the aircraft manufacturers are engaged in a dogfight with one another to rule a greater share of the skies.
The order placed by Air China is slated to be delivered starting 2016 and will continue through 2020. The 737 orders have come around four months after the plane maker had received orders for 80 737s from BOC Aviation of Singapore. Boeing is very optimistic about the demand from the Chinese market. The company expects this emerging market to play a key role in the future demand for aircraft.
The growth market to benefit Boeing
In its 20 year outlook, Boeing predicts that China will need around 6,020 jets during the period and this will be driven by increased passenger traffic. More than 72% of the orders are for narrow-body, a space where Boeing desperately wants to contend Airbus more aggressively. With the 737 successor, dubbed the 737 Max, the company is confident to win big orders. Airlines in the countries are looking to expand their capacity to match the burgeoning demand for air travel in the country.
Besides Air China, China Eastern Airlines has also shown interest in Boeing 737. The airline said that it would need 80 737s, and has already given firm commitment for 50 of these jets in the current year. The announcement of the Air China order sent Boeing shares up 0.69% to 127.1. Boeing Northeast Asia vice president of sales and marketing for commercial airplanes Ihssane Mounir expressed the order win excitement saying:
"Our long-standing and productive partnership with Air China dates back to the airline's beginning and we are proud the 737 has been part of their success…we are excited to see that the 737 family will play a significant role in Air China's continued success"
Boeing in good stead
Boeing has portrayed strength in the current year with decent revenue growth, deliveries, earnings per share and strong order flow despite volatile oil prices. As the company’s backlog is getting heavy with robust order flows, particularly for the single aisle 737, it plans a production hike to manage the deliveries on time. Demand for aircraft is expected to be strong in the future and both Boeing and Airbus shall continue to win orders from airlines as they prepare to roll out their latest workhorses. However, only time will tell which aircraft maker will occupy a greater share of the commercial airplane market.
