The Sky’s the Limit for the Aircraft Industry
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Chicago-based Boeing (NYSE: BA) posted a surprise improvement in second quarter revenue this Wednesday, as demand for passenger jets soared and the defense wing of Boeing had stronger-than-expected returns.
Boeing reported that net income rose by 3 percent to $967 million, or $1.27 a share, in this quarter, from $941 million, or $1.25 a share, a year earlier. Boeing’s revenue rose 21 percent to $20 billion in this quarter from $16.5 billion a year earlier.
The report topped analyst expectations, and Boeing raised its profit forecast for the second time this year, buoyed by increased military and passenger jet sales. The profit forecast indicates that the company might be protected from the troubled skies of the sluggish international economy. The company’s most profitable models, the 777 and the 737, continued to do well, while Boeing is also starting to construct the new 787 Dreamliner jets. Boeing earlier had costly hitches in production of the 787, which has slowed the product down for years.
Boeing said it has also gained from stronger-than-expected results from military customers. Military revenue rose by 7% even though the United States and other nations have been tightening the belt in defense spending.
This comes as Mexico's largest airline, Aeromexico, on July 24, placed an $11 billion order with Boeing. This is being touted as the biggest aircraft investment by a Mexican airline in the country's history. Aeromexico reported that the order is for 90 737 MAX 8 planes and 10 787-9 Dreamliners, while Aeromexico has not yet specified financial terms and conditions.
Airbus (NASDAQOTH: EADSY.PK) will be surpassed this year by Boeing as the world’s top producer of commercial airplanes. Boeing said Wednesday that it expected to deliver 585 to 600 planes in 2012, while Airbus, which passed up Boeing in deliveries in 2003 and has led ever since, has projected its total aircraft deliveries at 570 this year.
EADS (European Aeronautic Defence and Space Company), Airbus’s parent company, is working on a new, long-range, hybrid helicopter known as the X3 (pronounced x-cubed) that can be used on both large and small aircraft. The chopper is being viewed as a revolutionary innovation, with increased speed and range from normal helicopters. EADS is very excited about the X3 opportunity, which will likely be a future contender for many future military missions and civilian applications, such as search and rescue, special operations, passenger transport, emergency medical services, offshore oil and gas transportation, and border security.
Meanwhile, Boeing and Bell Helicopter are jockeying for position in the helicopter race by publicizing the achievements of the V-22 Osprey, a tilt-rotor aircraft that lands and takes off like a helicopter, but flies like a plane.
Bell Helicopter, a subsidiary of Textron Inc. (NYSE: TXT), stands to gain much from the competition if they succeed with the V-22 Osprey. The company expects substantial growth in its commercial business in 2012 and sees stable orders in its military business despite cutbacks in U.S. military expenditures. Bell has a positive outlook on the year because of strong commercial demand and continued work on large U.S. military aircraft programs, which would provide stable orders for Bell.
All three aircraft manufacturers are trying to position themselves to contend for upcoming programs to replace most U.S. military helicopters in operation today.
These latest earnings reports, as well as the increasing competitiveness of the market, demonstrate that the aircraft making industry is not only alive and kicking, but has been generally well shielded from the effects of the global economic crisis. With new innovations and competitive products around the corner, the aircraft industry is flying high – and set to cruise to even a much higher altitude.
EvanBuck has no positions in the stocks mentioned above. The Motley Fool owns shares of Textron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.