QUOTE AND NEWS
Clusterstock  12 hrs ago  Comment 
By Alwyn Scott EVERETT Wa. (Reuters) - - Boeing executives and state political leaders took sledgehammers to a 1960s office block on Wednesday to help clear the way for a factory that will make composite wings for the company's newest jet, the...
Motley Fool  Aug 13  Comment 
Boeing plans to put even more seats into the ubiquitous 737. Will this plane be coming to an airline near you?
TheStreet.com  Aug 13  Comment 
Story has been updated to reflect pre-market trading in Boeing and China Southern shares. NEW YORK (TheStreet) -- The chairman of China Southern Airlines last week endorsed the concept of a Chinese-built narrowbody aircraft. It’s just not...
Japan Today  Aug 12  Comment 
All Nippon Airways (ANA) will replace Japan Airlines (JAL) as the company charged with maintaining two government aircraft, it was announced Tuesday, following yet another battle between the domestic rivals. A government commission also...
Clusterstock  Aug 12  Comment 
(Reuters) - Boeing Co said it had been jointly selected with United Technologies Corp's Sikorsky unit to build a next-generation multi-role helicopter for the U.S. Army. The first flight for the program is expected in 2017, Boeing said. The...
TheStreet.com  Aug 12  Comment 
NEW YORK (TheStreet) -- Shares of Boeing Co. are slightly higher in early morning trade as the head of the company's defense, space and security business said that nearly two-thirds of the $6 billion in cost cutting the unit is undertaking will...
Clusterstock  Aug 11  Comment 
SEATTLE (Reuters) - The head of Boeing Co's defense, space and security business said on Monday that nearly two-thirds of the $6 billion in cost cutting the unit is undertaking will come from savings found in its network of suppliers. "Out of...
Japan Today  Aug 11  Comment 
Mitsubishi Heavy Industries Ltd (MHI) will make investments for production facilities for the 787 composite wing box at Shimonoseki Shipyard & Machinery Works (Shimonoseki) and Nagoya Aerospace Systems Works (Nagoya) in response to Boeing's plan...
Forbes  Aug 11  Comment 
Consistently, one of the more popular stocks people enter into their stock options watchlist at Stock Options Channel is Boeing Co. (NYSE: BA). So this week we highlight one interesting put contract, and one interesting call contract, from the...
SeekingAlpha  Aug 10  Comment 
By ICRA Online Ltd.: Boeing (NYSE:BA) is the world's leading manufacturer of commercial planes and military jets, selling aircraft to more than 150 countries worldwide. The company has five operating segments that include Commercial Airplanes;...




 

Boeing Company (NYSE:BA) is the world's largest aerospace and defense company. The company operates in over 90 countries and claims the title of America's largest exporter. Its has three divisions: commercial airplanes, Integrated Defense Systems (IDS), and Boeing Capital Corporation[1] Of the three divisions, the most prominent is the commercial airplane section. This division faces intense competition from EADS NV (EADSY) and its Airbus line of planes.

Business Overview

Headquartered in Chicago, Illinois, Boeing was originally founded in the 1910s in Seattle, Washington. After a series of mergers and splits (in which today's United Airlines was spun out, among others), Boeing emerged in the fifties as the premier US aircraft manufacturer, participating heavily in government air defense projects. It was not until 1958 that Boeing began delivery of its first commercial airplanes, the segment for which it is most commonly recognized today. Although Boeing is today perceived primarily as a maker of commercial planes, for much of its history, the company's involvement in space and defense programs has actually overshadowed its commercial airplanes manufacturing.

Boeing NASA Systems, based in Houston, is a major contributor to the space program. Boeing is responsible for building a lot of robotic equipment and hardware that NASA has used in its space shuttle and International space station.

Important News

AMR Corp's American Airlines is negotiating with aircraft makers EADS NV (EADSY) and Boeing Company (BA) to replace its entire domestic fleet of dreamliners by purchasing at least 300 airplanes in a deal valued at about $15 billion. American, which currently operates an all Boeing fleet, is interested in Airbus' narrow-body family of A320 airplanes as well as a new-engine A320 variant that will go into production in 2015. [2]

Business Growth

  • Revenue: Boeing's revenue has decreased from $68.28 billion in 2009 to $64.31 billion in 2010. The revenue decrease is attributed to various factors such as a decline in airline demand and negative publicity associated with the multiple delays of the 787 Boeing Dreamliner.[3] For the first half of 2011, revenues increased 2% from $30.79 billion in 2010 to $31.45 billion.[4]

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  • Net Income: Boeing's net income has increased from $1.31 billion in 2009 to $3.31 billion in 2010. Most of this more than 250% increase in net income comes from streamlining and efficiency procedures implemented by Boeing.[3] For the first half of 2011, net income increased 17% from $1.31 billion in 2010 to $1.53 billion.[4]

Business Segments

Commercial Airplanes (around 50% of revenues[1]): This segment includes the Boeing 787 Dreamliner, which has had the most successful launch of any new commercial airplane in Boeing history based on the number of orders. However, the construction and testing of the plane has forced Boeing to delay its launch numerous times.

Integrated Defense Systems (around 50% of revenues[1]): Notable IDS products include:

  • Fighter Jets
  • Rotocraft
  • Large Aircraft
  • Missiles/Bombs
  • Satellites
  • Communication Systems (Joint Tactical Radio Station)
  • Space Systems (space shuttles, including Apollo series)
  • Launch Systems (sea and land based launches of satellites into orbit)
  • website free

Boeing Capital Corporation (less than 1% of revenues[1]): This segment is a provider of financial solutions for commercial and government airline customers. Basically, BCC owns planes and structures leases for customers to borrow their planes. This part of Boeing has seen significant decline because of the amount of older planes being taken out of the airways to make room for newer, more fuel efficient planes.

Trends and Forces

Airline industries are more sensitive to the economy than other industries

Typically, airline companies and aircraft manufacturers are more prone to swings in revenue and equity market prices due to the release of economic indicators.[5] Consumers tend to reduce travel if personal economic conditions are suboptimal, forcing airlines to cut capacity and production. Indicators such as unemployment indices, personal income, and even home sales affect airline industries in exaggerated fashion. Though this means less for Boeing and more for the airlines themselves, reduced travel demand will mean significantly reduced demand for aircraft from Boeing, web free leaving the company vulnerable to low productivity and may affect its bottom line.

The airline industry is historically cyclical, with periodic downturns and upturns. Terrorist attacks like 9/11 and disease outbreaks like H1N1 can both have very negative impacts on airline travel, sparking an industry downturn that hurts airlines and manufacturers alike. Furthermore, Boeing depends heavily on international markets, primarily developing countries like China to maintain a steady demand for new aircraft. About two thirds of commercial airplane sales and backlogged orders come from international markets.

Dependence on US defense budget

Boeing’s Integrated Defense Systems (IDS) revenues are largely dependent on the US Department of Defense's budget spending, and on Boeing’s ability to win new business from the Department. (Past Defense business Boeing has obtained include technology development for US Secure Border Initiative, new orders for the Apache and Chinook helicopter programs, and the Future Combat System program.)

The IDS division receives more than 80% of its revenue from the US Department of Defense, and due to strong congressional support for the Defense budget because of the war in Iraq, IDS saw record revenues in 2006. Defense aircraft spending may remain high as well--the average age of an Air Force aircraft is more than 25 years, so demand and support for defense aircraft replacement is high. This bodes well for Boeing, since the company produces many different kinds of fighter jets (F/A -18, F-15, F-22), tankers (KC-767) and transports (C-17, C-32A) for the US military. However, the Department of Defense's budget does vary according to perceived threat to the US, so reduced levels of global threat could have a negative effect on the budget.

Boeing Faces Risk from a Shift to Fixed Cost Development Contracts

Fixed cost development contracts allocate companies like Boeing a limited amount of money for defense product development that is not subject to change. Since defense companies often spend more money on projects than was initially agreed upon, this puts pressure on the companies. If fixed cost development contracts are indeed adopted by the US Department of Defense, Boeing could suffer.

Increase in Fuel costs may reduce airline purchasing power

Fuel expenses are by far the largest operating expenses in the airline industry, representing about one third of an airline's annual operating expenses on average.[6] As a result, elevating fuel costs reduce profits for airline companies, who may cut down on airplane orders to make ends meet. For example, In 2007, Southwest Airlines Company (LUV)'s fuel expenses increased 10.4% because of higher fuel costs.[7] Because of higher fuel prices, many airlines may reduce plans for capacity or Available Seat Miles (ASM) expansion, and thus may cut back on purchases of new aircraft.

Labor Problems Hurt Operations

Boeing has about 154,000 employees in its company, of whom about more than a third are unionized in various forms. If Boeing does not meet contracted union specifications about certain employee wages, hours, and working conditions, or if workers decide to raise demands, then massive strikes could result, creating serious problems for Boeing in the future, as it has in the past.

Competitors

In the commercial airline business, Boeing operates in a duopoly with Airbus. Airbus is the largest subsidiary of the European Aeronautic Defence and Space Company. Airbus S.A.S., is an aircraft manufacturing company based out of several European nations, free webs with the majority of its operations in France, Germany and Spain., Airbus is the largest freight airline producer, and captures more than half of all airline orders of planes that have 100 or more seats.


References

  1. 1.0 1.1 1.2 1.3 Wikinvest SEC Files: BA 2009 10-K, Item 8
  2. Reuters: AMR talking with Boeing, Airbus for 250 planes: report
  3. 3.0 3.1 Wikinvest SEC Files: Boeing 2010 10-K, Item 8, The Boeing Company and Subsidiaries Consolidated Statements of Operations
  4. 4.0 4.1 Boeing Company New Release - Second Quarter 2011 Earnings
  5. MarketWatch: Airline Stocks Hammered by Latest Economic Data, 08-19-2010
  6. Air Transport Association
  7. LUV 2007 10-K, Item 7, pg. 20
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