Boeing Adds $1 Billion to Service Contract Orders

While announcing maintenance and repair contracts isn’t as sexy as announcing the sale of 100 new commercial airliners, Boeing Co. (NYSE: BA) announced Tuesday from the Singapore Air Show that it had written service contract orders for more than $900 million.

In the fourth quarter of 2017, Boeing reported revenues of $4 billion from its global services business. For the full year, services revenues rose 5% year over year to $14.64 billion.

Earlier this year Boeing projected a need for aerospace services at $2.6 trillion over the next 10 years. Over the next 20 years, Boeing projects a total commercial services market worth nearly $8.5 trillion. CEO Dennis Muilenburg has set a target for Boeing of $50 billion in services revenue by 2022. The company’s 2016 services business totaled nearly $14 billion.

Stan Deal, president and CEO of Boeing Global Services, said:

Boeing is serious about helping customers optimize the performance of their fleets and reduce operational costs throughout the lifecycle. Predicted growth for aerospace services in the Asia Pacific brings opportunities to partner with local industry to understand the region’s greatest needs, invest in new capabilities to meet those needs, and then bring them to market quickly.

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The agreements announced this morning touch all four of Boeing’s services capabilities: parts; engineering, modifications and maintenance; digital aviation and analytics; and training and professional services.

Here are a few of the agreements Boeing called out:

• All Nippon Airways signed a contract for 36 landing gear exchanges for the 787.
• China Southern Airlines and Guangzhou Aircraft Maintenance Engineering Company signed an agreement to develop service capabilities for the Boeing Global Fleet Care portfolio, as well as enhanced component and composite repair capabilities.
• SilkAir signed an agreement to receive fleet material services for 54 of its 737 MAX and Next-Generation aircraft. Fleet material services include Component Services Program, Integrated Material Management and Customer Furnished Parts, providing the customer with a centralized supplier of parts.
• Alaska Airlines signed an agreement to renew Jeppesen Flight Planning for its 737 fleet.
• DHL has ordered one 767-300ER Boeing converted freighter. Boeing converted freighters carry high-density cargo on long-range routes, as well as e-commerce cargo on domestic and regional routes.

Boeing stock dropped about 5.7% on Monday and traded up about 0.3% shortly after Tuesday’s opening bell, at $330.54 in a 52-week range of $163.69 to $361.45. The Dow and S&P 500 were down more than 1% in the early going following Monday’s massive drop.

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