Update: Boeing's Forecast And Garuda Indonesia's Order For 50 737 MAX 8s

| About: The Boeing (BA)


Boeing announced that Garuda Indonesia has placed an order for 50 737 MAX 8s.

Earlier I said, there is a steady growth in commercial aviation and major share in this growth will be from the Asia Pacific region.

The Boeing-Garuda deal supports my previous view that Boeing will fully capitalize on growing demand for air travel across the world.

Boeing (NYSE:BA) announced on Sunday that Indonesian flag carrier Garuda Indonesia (GIAA.JK) has placed an order for 50 jets, worth $4.9 billion at list price. The airline will purchase 46 single-aisle 737 MAX 8s and will convert existing orders for four Next-Generation 737-800s to 737 MAX 8s. First delivery of the airplanes is scheduled for 2017.

Dinesh Keskar, senior vice president, Boeing Commercial Airplane, Asia Pacific and India Sales, said, "The 737 MAX will be a great addition to the Garuda's fleet. It will build on the strong tradition of service that Garuda Indonesia has established with the 737 family. This order demonstrates Garuda's trust in Boeing and a strong commitment to operate the most fuel-efficient single-aisle airplanes in the market today and in the future."

As per Boeing's 2014 market outlook, the world will need 36,770 new planes worth $5.2 trillion between 2014 and 2033, which is a 4.2% jump from last year's forecast. The outlook mainly reflects rising demand from emerging areas of the Asia-Pacific. To meet the demand in one of the world's fastest growing aviation markets, Garuda Indonesia is in an expansionary mode. The airline is planning to double its fleet, adding up to 250 aircraft, by 2025. Boeing's market outlook also suggests that 70% of the forecasted demand will be for fuel efficient, single-aisle jets like the Next-Generation 737-800 and the new 737 MAX 8. Among the total demand for new aircraft, 42% of all deliveries will replace older, less efficient airplanes.

The new order from Garuda Airlines is completely in line with the market predictions as the airline ordered all 737 MAX 8s. This aircraft is 14% more fuel efficient than its closest peer in the single-aisle aircraft market.

Foreseeing the demand for 737s, the company has announced that it will boost 737 aircraft production to 52 airplanes per month in 2018, up from the existing 42 and from a planned level of 48 in 2017. This will mark a new production record for any jet in history.

My previous article suggests that there is a long-term growth in worldwide air travel, major contributor to that growth will be the rise in passenger traffic in the Asia-Pacific region. And Boeing, being the market leader, will fully capitalize on that demand. It was also mentioned that Boeing is consistently getting new orders from airlines across the world. Here is another one added to Boeing's list, worth $4.9 billion. So, my opinion regarding BA remains the same that it is a recommended stock with low risk and moderate gains.

Coverage was initiated with "Boeing: Clear Skies Ahead"

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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