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The Boeing Company BA recently clinched a contract, with an estimated value of $9.2 billion, for delivering Advanced Pilot Training aircraft and ground-based training systems. The deal includes an initial order of $813.4 million. The contract was awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, Dayton, OH.
Details of the Deal
Per the terms of the deal, Boeing will deliver of 351 aircraft and 46 associated training devices along with other ancillary supplies and services.
Under this agreement, the company can supply up to 475 aircraft and 120 training systems for the U.S. Air Force. Work related to the deal will be performed in St. Louis, MI and is expected to get completed by 2034.
What Favors Boeing?
Boeing, being one of the major players in the defense business, stands out among its peers by virtue of its broadly diversified programs, strong order bookings and solid backlog. Notably, the company’s Defense, Space & Security segment, which manufactures Advanced Pilot Training aircraft along with other military jets, enjoys a solid top-line growth trajectory. Evidently, this unit witnessed 9% year-over-year revenue growth in the second quarter of 2018.
This upside in revenues is driven by inflow of contracts from the Pentagon, courtesy of Boeing’s proven expertise in aerospace programs. Also programs related to wide variety of aircraft components, parts and training systems boost the company’s revenues. Evidently, its Global Services unit, which offers aviation services support, aircraft modifications, spare parts and training systems, witnessed a year-over-year improvement of 15% in revenues during the second quarter.
In line with this, the latest contract win bears a further testament to the solid demand Boeing enjoys in the global aerospace market, boosting the top line further.
Looking Ahead
Per Mordor Intelligence, the military trainer aircraft market is expected to see a CAGR of 5.3%, from 2018-2023. Such growth can be attributed to the economic expansion and increase in defense budgets in the developing countries, in recent years. This, in turn, should enable Boeing to significantly grow in the expanding market, courtesy of its next-generation T-X pilot training system.
In July 2018, Boeing agreed to acquire KLX Inc., a major independent provider of aviation parts and services in the aerospace industry. The acquisition, once completed, should allow this aircraft major to capture more shares in the global aircraft after market.
Price Movement
Boeing’s stock has gained 45.2% in the past 12 months compared with the industry’s growth of 22.3%. The outperformance was primarily led by the robust worldwide demand for its commercial aircraft and military jets.