Boeing Bags $1.4B Order from China Airlines; Shares Up

The Boeing Co. (BA) bagged an order worth $1.4 billion from Taiwan’s state-owned carrier China Airlines. The order for Boeing’s four 777 Freighters (777F) opens doors to new market opportunities for the fast-paced global air cargo demand.

Shares of the global aerospace company gained 2.8% during the early market trading session due to the China Airlines order. However, BA shares ended the day down 2.3% at $189.75, after the market started factoring in the huge Q4 loss, which the company reported the day earlier.

China Airlines Orders BA’s 777 Freighters

Boeing’s 777 Freighter is the world’s largest twin-engine cargo jet, with a range of 4,970 nautical miles (9,200 km) and a maximum revenue payload of 102 tonnes. The engines bring down fuel consumption by 17% and CO2 emissions per tonne, compared to prior generation airplanes.

China Airlines is both a passenger and cargo carrier. The carrier already has an extensive fleet of Boeing jets. Adding 777F to its fleet will allow the carrier to have longer-duration flights with fewer stoppages, resulting in lower landing fees and the lowest trip cost for any large freighter.

In 2021, China Airlines recorded air cargo revenue increased a whopping 186% to $3.6 billion, exceeding pre-pandemic levels, albeit the passenger revenue plunged 96%. According to the company, the robust revenue growth was achieved by leveraging its existing Boeing fleet including (18) 747-400 Freighters and (3) 777 Freighters.

Company Comments

Thrilled with the re-order, Ihssane Mounir, senior VP of Commercial Sales and Marketing said, “The market-leading capabilities of the 777 Freighter provide added capacity, improved efficiency, and greater value to China Airlines’ customers, enabling the carrier to meet air cargo demand and position itself for long-term growth.”

Meanwhile, China Airlines Chairman, Hsieh Su-Chien, said, “The 777 Freighter has played a critical role in our efforts to maintain profitability during the pandemic, and these additional airplanes will be an integral part of our long-term growth strategy.”

“We are excited to add more 777 Freighters due to their operational efficiency and reliability. Our fleet modernization program will enable us to deliver added value to our customers, especially as the global supply chain continues to evolve,” the Chairman concluded.

Analysts’ View

Following Boeing’s Q4 performance, Cowen & Co. analyst Cai Rumohr reiterated a Buy rating on the BA stock with a price target of $265, which implies 40% upside potential to current levels.

Commenting on the results, Rumohr said, “Upbeat production rate “color” on the Q4 call supports our thesis of a robust 2022-24 cash flow ramp, driven mainly by 737/787 inventory burndown. We see 2022 FCF of $5-6B, rising to $12.5B ($21/share) in 2024.”

Overall, the stock commands a Strong Buy consensus rating based on 13 Buys and 4 Holds. The average Boeing price target of $266.13 implies 40.3% upside potential to current levels. Shares have lost 2.3% over the past year.

Blogger Opinions

TipRanks data shows that financial blogger opinions are 75% Bullish on BA, which is one of the best blue-chip stocks, compared to a sector average of 69%.

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