Boeing Sales Are Soaring

Phillip is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Boeing (NYSE: BA) early in June predicted there to be approximately twice as many airplanes in the sky in the next two decades, and with a recent spate of sales it looks like the firm could be right.

I'm planning on buying shares of Boeing in the next week for that very reason. Just taking a look at some of the headlines is enough to make investors in this company cry for joy: Ryanair May Buy 200 More Boeing Jetliners (Wall Street Journal, June 24), and Dreamliners get more attention, says Boeing (New Zealand Herald, June 24). Certainly this attention must mean something, and those are just two headlines on the day this post was written. 

Ryanair sees increase in ridership

Ryanair (NASDAQ: RYAAY) already announced around mid-June its plan to purchase 175 Boeing airplanes for about $15.6 billion. And at the time, Chief Executive Michael O'Leary said he expected another major deal with Boeing by the end of the year. His firm is Europe's largest budget carrier. The company is making the purchase as many analysts have said growth at the company is limited. However, Ryanair recently raised growth forecasts and said it will carry 110 million passengers by 2020. 

According to O'Leary, the company plans to develop a trans-Atlantic low-cost airline. He said the major hindrance in developing the airline is the lack of aircraft available for such a mission. He gave a timeline of three to four years to develop the trans-Atlantic airline, which would be a new brand of Ryanair. As if a new airline isn't enough, O'Leary was denied in his growth efforts by the European Union to purchase rival airline Aer Lingus, however Ryanair owns an interest in that company. The European economy is behind the United States in its recovery, and buying Ryanair could have you in the game early, before the share price really takes off. The company obviously has high hopes for increased ridership, as people are more able to afford vacations and businesses can pay to send employees abroad.

What the purchases mean

The massive acquisitions tell me something major: Boeing is right about the doubling of airplanes by the early 2030s. That's enough to keep sales at Boeing up long into the future. Furthermore, have you noticed that many of the planes airlines are currently using are quite old? That's because many are from the 1970s and are in dire need of replacement. They aren't quite falling out of the sky, but as an avid flyer I've noticed long delays due to maintenance. This could be because of the sheer age of the aircraft, prompting many replacement orders.

United Airlines orders

Among those who purchased the Boeing 787 Dreamliner was United Continental (NYSE: UAL). The firm bought 20 aircraft almost immediately after they were released. 10 consist of the new Dreamliners, and another 10 are the earlier 787-9 model introduced in late 2011. The first of those planes aren't expected to be delivered until 2018. So far, Boeing has faced some issues with the Dreamliners that United is already using. While these issues usually come up with new aircraft, such as oil leaks and battery problems, they are often solved and are just products of a young aircraft. This shouldn't affect the long-term share prices of these companies. In fact, United's stock slide from about $32 to around $29 recently indicates a buying opportunity, as this company will benefit from the turnaround in the economy.

Growth for all three firms looks likely

In the latest tally of orders, Boeing sold 840 Dreamliners, but the firm is only able to make 10 per month. However, taking a look at the inventories of $37 billion at the firm, means Boeing has built up significant stock. All evidence points to an increase in airline ridership in the years ahead, and investors should take Boeing seriously as an investment. This company is a leader in the airplane manufacturing business, and profits could just be hitting the runway before they really take off.

The price of becoming the world's greatest investor is that Warren Buffett can no longer make many of types of investments that made him rich in the first place. Find out about one such opportunity in "The Stock Buffett Wishes He Could Buy." The free report details a sector of the economy Buffett's heavily invested in right now and exactly why he can't buy one attractive company in that sector. Click here to keep reading. 

Phillip Woolgar has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus