Business Analysis: Boeing Commercial Airplane (BCA)

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Global economy recovers from recessions, stirring up strong demand for flights of passengers and freights. As estimated by Federal Aviation Association (FAA), commercial airline fleet will increase by 4.2% annually in the following 20 years. Boeing takes up 49% of market share and is ready to capture more shares among the expected $6-trillion-dollar market with growth of 5% over the long run. In addition, regional conflict and new defense budget boost demands in military defense sector, where Boeing is also a powerful player.

Founded in 1916, the Boeing Company has been the world leader in aircraft manufacturer for decades. Generally, Boeing duopoly the commercial airplane market together with Airbus, and oligopoly the Aerospace & Defense
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In 2017, BCA contributed $56 billion of revenue and delivered 763 commercial airplanes, among which B-737 and B-787 are the two driving factors. This segment produces world-famous airplane family (B-737, B-777, B-787 etc.). To satisfy different demand of mainline aviation and regional aviation, BCA developed two types of aircraft, narrow body (single-aisle airplane, tiny space and less seats) and wide body (twin-aisle, large space and more seats).

Geography Diversity
As an industry leader, Boeing is deeply integrated in global economy. It owns 330 suppliers throughout the world and customers from over 150 countries. Traditionally, Boeing made nearly 70% of its revenue from developed economies, i.e. US, Europe, and Japan. Recently, demands from emerging market experienced significant growth for years. In China, for example, revenue increased by four times since 2010. In FY 2017 China contribute 13% of total revenue, $1.2 billion in total.

5
Reasons To
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As the projection predicts, 43% of the demand is to update aged, low-efficient aircraft. As for geography distribution, around 39% of the total commercial demand is likely to come from the Asian (include China), 21% from North America, 18% from Europe and the balance from the rest of the world.

Single-aisle jets (i.e. 737, Boeing’s best seller) is expected to be the major engine backing up the growth, 72% of total projection, which means 29,350 jets worth $3.2 trillion in the future 20 years. Such expectation is mainly based on the global preference to economical airline flight and the expansion of emerging markets, whose requirement is comparable to the replacement of aged airplanes.

Boeing announced clear schedule to elevate production rate - Backed by excellent earnings and record cash flow in FY 2017, Boeing announced to invest $300 million to improve productivity. In detail, such investment is planned to expand factories, update equipment. Furthermore, the new Boeing 737 MAX and the current 737-800 will be the major growth catalysts. Delivery of 737 improved to 140 from 120 a year ago. It clinched approximately 72% of the total 737 orders. In addition, Boeing plans to boost 737 output to 57 units per month in 2019 from 52 per month in 2018. Meanwhile, it has started the production rate of 787-Dreamliners at up to 14 per month by the

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