Hi Readers! The world has witnessed a wave of historic globalization that we have never seen in the past, thanks to the relentless development of the aviation industry. We at Call-Levels are beating the Monday Blues by thinking blue skies, travelogues and escapism! How else can we escape the mundanity of everyday life without the invention of aircrafts? Buckle up as Boeing takes you to the skies in today’s Market Monday!
From 2002 through early last year, Pentagon conducted 11 flight tests of the missile-defense-system named Ground-based Midcourse Defense(GMD), but it failed to intercept the mock enemy warhead 6 times out of the 11 tests conducted. This unprecedented failure rate implies that this system may not be able to foil a nuclear strike by North Korea or Iran if wars are to go down. The funny side of the story is that, Boeing, which is the prime contractor and monitor of the GMD system, has received nearly $2 billion in bonuses despite the underwhelming test results. What’s more, this program has cost taxpayers more than $40 billion to date. A whooping $40 billion! There goes the taxpayer’s money! A February report issued from the Government Accountability Office had criticised the insufficiency of the GMD to be proven useful during a real attack, accounting the fact that these test exercises were meticulously orchestrated. On top of that, the interceptor GMD will be depleted quickly if multiple enemy missiles are fired, since around 5 interceptors would have to be launched for each incoming enemy warhead. A study by three physicists with expertise in missile defense have concluded in July that, “the GMD system is simply unable to protect the U.S. public.” Whoopsie, do Americans still think that they are safe and sound on the other side of the world?!
Boeing might see a whooping gain in revenue as the U.S. government is likely to approve an order valued at around $4 billions for 36 Boeing F-15 fighter jets from Qatar. This order has been postponed for two years since there are widespread beliefs stating that Qatar supports extreme Sunni Islamic groups. On top of this deal, fighter aircrafts worth $3 billion being requested by Kuwait is scheduled to get a green light in the coming future. The sales still have to go through the White House after being passed by the Defense and State Departments. With the sale of military aircrafts, Boeing’s defense business is likely to be around in the industry for several more years.
Did you know that a new 747- 8 passenger jet’s listed price is $378.5 millions? This supersized passenger jet, however, is definitely not the top pick for the public aviation companies around the globe. Since January of 2015, only a minimal number of 747s are requested, 10 to be exact. In a filing with the U.S. Securities and Exchange Commission, Boeing Co mentioned that they might have to end its production of the 747s to mitigate the production cost and other financial risks, unless there is a surge in demand for that model. What a bummer! The stagnated demand for Boeing 747s stemmed from the increasing capacity of 787 and Airbus A350, allowing them to offer better economics outcome during deployment. Earlier, Boeing decided not to compete directly with the larger A380 superjumbo jet from Airbus as Boeing did not see the market for these massive planes growing substantially to justify for the investment to compete. In the end, Airbus does not have to break a sweat to fight for autonomous power in the very-large airplane market. Sweet victory for Airbus? Maybe.
The air transportation industry is said to be going through a bearish industrial cycle. Is it true for Boeing Co? The company is projected to receive 535 new orders this year, but demand stands at 335 thus far . In addition, rumor has it that the new CEO of United Airlines holds a bias towards Airbus. Are investors losing faith in Boeing stock? Despite all these speculations and weak demand, investors should remain bullish on Boeing Co. The stock is trading at about $130 which is down about 1.6% year-to-date. However, it also sees a 10.79% gain for the past six months. The announcement of new plans on cutting “777” and increasing “737 MAX” production is going to spearhead Boeing’s sales revenue in the upcoming years. Is this a message for Airbus not to mess with Boeing as the latter is not afraid to utilize their huge backlog to stabilize any financial accidents. This strategy is reassuring to investors as their cash-cow products “777” and “737” will most likely get an upgrade in the near future to keep sales flowing. Despite the new market entry of Bombardier Inc, the aviation market still remains as a showdown between Airbus and Boeing.
Here’s a snippet of the air routes traveled by the top 7 airlines!