Boeing (BA) En Route to Deliver 787 Jets to Vistara for $3.3B

Per media sources, The Boeing Company BA is all set to enter into an agreement with Vistara to deliver six of its 787 dreamliners along with an option to supply additional four aircraft. This deal, if struck ultimately, shall spoil Airbus Group’s EADSY A330neo’s efforts to win the same contract.

Vistara, looking to expand its fleet, is yet to decide between the 787-9 and the 787-10 versions of dreamliners that could fly non-stop to major European destinations. The deal value, including options, could approximately mount to $3.3 billion in list prices.

Boeing and Airbus: The Rivalry

The global commercial aircraft market is dominated by two major jet makers, European conglomerate Airbus and U.S. based aircraft giant Boeing. The fierce rivalry between the two has led both the companies to control around half of the global aircraft market. Even new entrants from China, Russia and Canada have been struggling to fight for market share due to the strong duopoly both the companies exercise in the broader aerospace sector.

While Airbus lagged its U.S. counterpart for much of 2017, it managed to capture the global sales title for a fifth consecutive year in 2017 by winning a massive deal at the Dubai Air Show in last December (as per a report by CNN Money).

However, in terms of recent events, Boeing has been able to edge over its arch rival and put sustained pressure on Airbus by acquiring major multi-billion-dollar contracts from American Airlines and Hawaiian Airlines. Notably, in both the deals, the respective airlines chose Boeing 787 over Airbus’ wide-body jetliners. These contract losses must have weighed on Airbus’ operations, as a result of which the company has cut down production plans for its newest wide-body jetliner.

We believe the latest deal from Vistara, inclined toward choosing Boeing’s 787, will further add to Airbus’ poor performance in its wide-body jet business line.

Boeing’s Prospects in India

Of late, India-based airlines have been significantly increasing their fleet size to meet rigorous customer demands, due to the rising level of passenger and cargo traffic. According to the International Air Transport Association (IATA), the domestic Indian passenger traffic witnessed a 17.5% rise in January 2018 from the previous year, led by strong rates of economic expansion in the country.

In light of these developments, India has emerged as one of the most promising markets for aircraft manufacturers like Boeing. Notably, the country is projected to become the world’s fastest growing aviation market. According to the company, India will need 2,100 new planes worth $290 billion in next 20 years, up 13.5% from the year-ago estimate of 1,850 planes.

In terms of its growth prospects in India, Boeing entered in to an agreement with Jet Airways in April 2018 for delivering 737 Max Jets worth $8.8 billion. We may expect the latest deal with Vistara to strengthen Boeing’s expanding market in the country, once finalized.

Price Movement

Boeing’s stock has rallied about 90.9% in a year compared with the industry’s gain of 40.4%. The outperformance was primarily led by the robust worldwide demand for its commercial aircraft and military jets.

Zacks Rank & Key Picks    

Boeing currently carries a Zacks Rank #2 (Buy). A few top-ranked stocks in the same sector are AeroVironment, Inc. AVAV and Wesco Aircraft Holdings, Inc. WAIR.

While AeroVironment sports a Zacks Rank #1 (Strong Buy), Wesco Aircraft Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AeroVironment delivered an average positive earnings surprise of 147.43% in the last four quarters. The company’s long-term growth rate is pegged at 20%.

Wesco Aircraft Holdings’ long-term growth rate is pegged at 12%. The Zacks Consensus Estimate for 2018 earnings has risen by 10% to 77 cents in the last 90 days.

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