In this presentation there is analysis for Boeing, history, sales, supply side analysis, Commercial Aircraft Demand Determinants, Market Drivers, Order Comparison, Delivery Comparison, Current Strategy
Airbus & Boeing Activities in new Development TechnologySami El Khatib
Technological advancement is the premise for competition in the aeronautic trade, so that this industry is the first in progressing science and technology. Among the world's biggest assembling commercial industries in terms quality of item, the airplane business is portrayed by a moderately little number of huge firms and various global organizations at each level. Airbus and Boeing are the world leaders in aircraft industry and a great case on how technology development and innovation can be processed to compete. Both companies are dominating the global market through their skilled teams, brand image and continuous innovation.
In this presentation there is analysis for Boeing, history, sales, supply side analysis, Commercial Aircraft Demand Determinants, Market Drivers, Order Comparison, Delivery Comparison, Current Strategy
Airbus & Boeing Activities in new Development TechnologySami El Khatib
Technological advancement is the premise for competition in the aeronautic trade, so that this industry is the first in progressing science and technology. Among the world's biggest assembling commercial industries in terms quality of item, the airplane business is portrayed by a moderately little number of huge firms and various global organizations at each level. Airbus and Boeing are the world leaders in aircraft industry and a great case on how technology development and innovation can be processed to compete. Both companies are dominating the global market through their skilled teams, brand image and continuous innovation.
Global Operations and Supply Chain Management: Airbus vs. Boeing Final Assig...Jamar Johnson
Final Assignment performed by Jamar Johnson and IE Business School classmates for our Global Operations and Supply Chain Management course. The class was taught by Professor and Associate Dean of IE Business School, Luis Solis.
Airbus and Boeing have been involved in a fierce duopoly in the large jet airliner market since the 1990s. Airbus began as a European consortium while the American Boeing absorbed its former arch-rival, McDonnell Douglas in a 1997 merger
Manufacturers like Lockheed Martin, Convair and Fairchild Aircraft in the United States and British Aerospace and Fokker in Europe withdrew from the market as they were no longer in a position to compete effectively
Over the years, competition has been intense; each company regularly accuses the other of receiving unfair state aid from their respective governments.
Based on http://www.slideshare.net/arjunparekh/duopoly-boeing-versus-airbus?qid=90919b4f-b341-4d82-8f75-3474f9f15e57&v=&b=&from_search=16
SSA 2012—Mountain and Ridge Soaring in Northern Utah (8x11)Glider Pilot
Presentation on mountain and ridge soaring in Northern Utah by Tim Taylor and Bruno Vassel at the 2012 Soaring Society of America convention in Reno, Nevada.
Visit SoaringCafe.com to see the accompanying videos.
Global Operations and Supply Chain Management: Airbus vs. Boeing Final Assig...Jamar Johnson
Final Assignment performed by Jamar Johnson and IE Business School classmates for our Global Operations and Supply Chain Management course. The class was taught by Professor and Associate Dean of IE Business School, Luis Solis.
Airbus and Boeing have been involved in a fierce duopoly in the large jet airliner market since the 1990s. Airbus began as a European consortium while the American Boeing absorbed its former arch-rival, McDonnell Douglas in a 1997 merger
Manufacturers like Lockheed Martin, Convair and Fairchild Aircraft in the United States and British Aerospace and Fokker in Europe withdrew from the market as they were no longer in a position to compete effectively
Over the years, competition has been intense; each company regularly accuses the other of receiving unfair state aid from their respective governments.
Based on http://www.slideshare.net/arjunparekh/duopoly-boeing-versus-airbus?qid=90919b4f-b341-4d82-8f75-3474f9f15e57&v=&b=&from_search=16
SSA 2012—Mountain and Ridge Soaring in Northern Utah (8x11)Glider Pilot
Presentation on mountain and ridge soaring in Northern Utah by Tim Taylor and Bruno Vassel at the 2012 Soaring Society of America convention in Reno, Nevada.
Visit SoaringCafe.com to see the accompanying videos.
Fear The emotional response to real or perceived imminent
threat
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which escape might be dificult
EChesters presents for the London Java Community an insight into how developers can have a direct influence on the UX of their product. Here we explore the methods, libraries and testing tools our language, Java provides us.
SSA 2012 Presentation: Extraordinary Weather and Extreme Soaring FlightsGlider Pilot
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Khan Mohd Eshtiaque, is currently a Masters in Management student at IE Business School. Previously, he interned as an M&A summer analyst at BDO's corporate finance division in Dubai, where he worked in deals in a variety of sectors including, natural resources, healthcare, facilities management, technology, real estate, utilities and agribusiness. Prior to that, Eshtiaque interned at the Private Banking department of HSBC.
Airbus A3XX: Developing the World’s Largest Commercial Jet Rishi Bajaj
Airbus A3XX: Developing the World’s Largest Commercial Jet (A) (9-201-028 HBR)
Contents:
Introduction to the Case, Industry
• Why is Airbus interested in building the A3XX?
• What are the objectives?
• What are the basic economies of large projects?
• Limited optionality
Done by-
111 Rakshit Jhunjunwala
115 Ankitesh Mathur
211 Manu Shrivastava
301 Balagopal Padmakumar
402 Rishi Bajaj
Airbus anticipated the 39,210 commercial and regional aircraft deliveries during the same period, asserting a positive comeback in the demand from 2021 onwards, ultimately driving the market to reach US$ 45.5 million in 2025.
Aircraft wheels are generally overlooked yet important component of an aircraft landing gear system providing the necessary structural strength and support to the tyres
1. Boeing Company Valuation
Hannah Goldberg, Sean Ryan, Jake Varsano, Andrew Ruvkun, Ted Poatsy
Tuck Bridge Program, Summer 2016
2. Why Boeing is currently
overvalued
Aerospace industry
poised for growth
Inability to meet market
needs
Valuation
Boeing is currently overvalued; we expect Boeing to drop
to $111 per share in 15 years
Short Term Industry Growth Products Valuation
• Favorable current market conditions
• Historic backlog in plane orders
• Emerging markets in Asia, Middle East, and Latin American
• Global defense industry spending increasing
• Loss of key defense contracts
• Commercial airplanes are struggling against Airbus in a
two-player market
• Boeing is less competitive in a larger market
• The firm is poorly positioned for future long term growth;
within 15 years it will fall to $111.
1
3. Why Boeing is currently
overvalued
Aerospace industry
poised for growth
Inability to meet market
needs
Valuation
Boeing is currently overvalued; we expect Boeing to drop
to $111 per share in 15 years
Short Term Industry Growth Products Valuation
• Favorable current market conditions
• Historic backlog in plane orders
• Emerging markets in Asia, Middle East, and Latin American
• Global defense industry spending increasing
• Loss of key defense contracts
• Commercial airplanes are struggling against Airbus in a
two-player market
• Boeing is less competitive in a larger market
• The firm is poorly positioned for future long term growth;
within 15 years it will fall to $111.
2
4. The airliner industry is a complement
to the airplane manufacturing industry
Short Term Industry Growth Products Valuation
Favorable
conditions
Increased
airliner
profits
Increased
demand
for new
airplanes
3
5. Overall airline industry growth driven
by three factors
Short Term Industry Growth Products Valuation
Favorable
Conditions
More
demand for
air travel
Low Oil
Costs
Low
Interest
Rates
4
6. Overall airline industry growth driven
by three factors
Short Term Industry Growth Products Valuation
Favorable
Conditions
More
demand for
air travel
Low Oil
Costs
Low
Interest
Rates
5
7. Airline passenger volume has increased due
to globalization and recovery of global economy
Short Term Industry Growth Products Valuation
700
720
740
760
780
800
820
840
860
880
900
2009 2010 2011 2012 2013 2014 2015
Passengers(Millions)
Airline Passengers
Source: Boeing Company Data
6
8. Asia
North America
Latin America
Middle East
Africa
Current market outlook predicts worldwide
passenger growth
Africa
Latin
America
Middle
East Europe
North
America Asia
Asia 7.1% 7.2% 7.2% 5.1% 4.4% 6.2%
North
America
6.2% 4.9% 6.1% 3.0% 2.4%
Europe 4.7% 5.0% 5.4% 3.3%
Middle
East
7.3% - 5.0%
Latin
America
8.1% 6.6%
Africa 6.7%
Source: Boeing Current Market Outlook 2015 - 2034
Traffic Route Growth Rates
Short Term Industry Growth Products Valuation 7
9. Overall airline industry growth driven
by three factors
Short Term Industry Growth Products Valuation
Favorable
Conditions
More
demand for
air travel
Low Crude
Oil Prices
Low
Interest
Rates
8
10. The operating cost of airliners is closely
correlated to the price in jet fuel
Short Term Industry Growth Products Valuation
Source: Government Accountability Office, Impact of Fuel Price Increases on the Aviation Industry
Jet Fuel and Airlines’ Fuel Costs as a Percentage of Operating Costs, 2002-2013
9
11. Fall In Crude Oil has produced large
profits for the airline industry
Short Term Industry Growth Products Valuation
Source: WTI
$-
$20
$40
$60
$80
$100
$120
2011 2012 2013 2014 2015 2016
Price
Crude Oil Price by Quarters
Huge Profits Margins for Airliners
10
12. Overall airline industry growth driven
by three factors
Short Term Industry Growth Products Valuation
Favorable
Conditions
More
demand for
air travel
Low Oil
Costs
Low
Interest
Rates
11
13. Low interest rates allows airlines to finance fleet
additions—low rates favorable for Boeing
Short Term Industry Growth Products Valuation
0
1
2
3
4
5
6
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
US Federal Reserve Rates (%)
12
14. Massive backlog in plane orders
secures near term outlook
• Currently 5762 total planes in
the backlog
• Factoring a high 20%
cancellation rate, order sheets
still full until 2022
Short Term Industry Growth Products Valuation 13
15. Why Boeing is currently
overvalued
Aerospace industry
poised for growth
Inability to meet market
needs
Valuation
Boeing is currently overvalued; we expect Boeing to drop
to $111 per share in 15 years
Short Term Industry Growth Products Valuation
• Favorable current market conditions
• Historic backlog in plane orders
• Emerging markets in Asia, Middle East, and Latin American
• Global defense industry spending increasing
• Loss of key defense contracts
• Commercial airplanes are struggling against Airbus in a
two-player market
• Boeing is less competitive in a larger market
• The firm is poorly positioned for future long term growth;
within 15 years it will fall to $111.
14
16. Boeing is a leader in the commercial and defense
aerospace industries
Commercial
• 2015 Revenue: $66 billion
• 762 new orders
• Current backlog at 5,800 airplanes
• Program Models: 737, 747, 767, 777, 777X, 787
• Most popular model: 737 at 10,105 total orders
Defense
• 2015 Revenue: $ 30.4 billion
• 186 aircraft orders
• 15,787 weapons system orders
• Program Models: F/A-18, F-17, CH-47 Chinook, AH-64
Apache, C-17 Globemaster III
• Most popular model: CH-47 Chinook at 41 deliveries
Short Term Industry Growth Products Valuation 15
17. BRIC nations produced strong growth in
aerospace sector over past decade
Short Term Industry Growth Products Valuation
Source: World Bank Databank
0
0.5
1
1.5
2
2.5
3
3.5
4
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Departures(Millions)
Aircraft Departures from BRIC Nations
China
Brazil
India
Russia
16
18. Global defense industry spending expected to grow
Short Term Industry Growth Products Valuation
220
230
240
250
260
270
280
290
300
2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F
Revenue(Billions)
Source: Deloitte, 2016 Global Aerospace and Defense Sector Outlook: Poised For a Rebound
Global Military Aerospace Manufacturing Revenue
17
19. United States defense spending is relatively
stagnant
Short Term Industry Growth Products Valuation
400
450
500
550
600
650
700
750
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Spending($billion)
US Defense Budget
18
20. Boeing lost three major defense contracts
B-21, $55 billion
Short Term Industry Growth Products Valuation
Military Satellite, $83 million
F-35A, $1.5 trillion
T-X Trainer Program, undetermined
19
21. Why Boeing is currently
overvalued
Aerospace industry
poised for growth
Inability to meet market
needs
Valuation
Boeing is currently overvalued; we expect Boeing to drop
to $111 per share in 15 years
Short Term Industry Growth Products Valuation
• Favorable current market conditions
• Historic backlog in plane orders
• Emerging markets in Asia, Middle East, and Latin American
• Global defense industry spending increasing
• Loss of key defense contracts
• Commercial airplanes are struggling against Airbus in a
two-player market
• Boeing is less competitive in a larger market
• The firm is poorly positioned for future long term growth;
within 15 years it will fall to $111.
20
22. 69% 14% 10% 8%Total
Revenue
(M)
Revenue per Segment (2015)
Commercial Aerospace
Boeing Capital
(not visible <0.5%)
$66,048 $13,482 $7,751$9,155
Source: Boeing SEC 10-K 2015 Annual Report
Defense Aerospace*
Commercial Aerospace earns 69% of Boeing’s
total revenues
* Defense revenues are broken down into segments: BMA, GS&S, N&SS
Short Term Industry Growth Products Valuation
23. Boeing’s commercial revenue outpaces defense
Short Term Industry Growth Products Valuation 22
0
20
40
60
80
100
120
140
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Boeing Revenue Breakdown ($ Billion)
Defense Revenue Total Revenue
24. Airliners evaluate planes based
on capacity, efficiency, and range
Capacity
Efficiency
Range
Short Term Industry Growth Products Valuation 23
25. Airbus meets airliners’ needs better
than Boeing does
Narrow Body Wide Body
737 MAX 8 A320 neo 777-200 A350-800
Capacity
(Passengers)
162 165 314 325
Efficiency
(mpg/passenger)
103 105 86 98
Range
(n mi)
3515 3500 5240 8100
Release Year 2017 2016 1998 2014
Short Term Industry Growth Products Valuation 24
27. Boeing has yet to pay $29 billion in
production costs for 787 development
Short Term Industry Growth Products Valuation
-6000
-4000
-2000
0
2000
4000
6000
8000
2010 2011 2012 2013 2014 2015
MillionsofDollars
Boeing Accounting Differences with 787
Earnings from operations using Program Accounting Earnings from operations using unit-cost Accounting
Source: Boeing Company Data, Bloomberg
26
28. Why Boeing is currently
overvalued
Aerospace industry
poised for growth
Inability to meet market
needs
Valuation
Boeing is currently overvalued; we expect Boeing to drop
to $111 per share in 15 years
Short Term Industry Growth Products Valuation
• Favorable current market conditions
• Historic backlog in plane orders
• Emerging markets in Asia, Middle East, and Latin American
• Global defense industry spending increasing
• Loss of key defense contracts
• Commercial airplanes are struggling against Airbus in a
two-player market
• Boeing is less competitive in a larger market
• The firm is poorly positioned for future long term growth;
within 15 years it will fall to $111.
27
29. • Risk-free rate : 1.37 %
• Beta : 1.028
• WACC : 9.5 %
• Terminal growth rate : 1 %
• COGS growth rate: 2.5%
• Terminal forecast year : 2030
• Tax rate : 27.7 %
The projected firm value is $69B, suggesting a
share price of $111
Financial assumptions Key results
$108B
2020
revenue
$7.2B
2020 EBIT
$69B
Enterprise value
$111
Price per
share
Short Term Industry Growth Products Valuation 28
30. Year 2015 2016 2017 2018 2019 2020 Terminal Value
Total Revenue 96,114 98,517 100,980 103,504 106,062 108,744
Cost of Goods Sold 82,088 84,140 86,243 88,398 90,608 92,873
EBIT 8,668 8,930 9,200 9,476 9,760 10,053
After-tax Income 6,267 6,456 6,651 6,851 7,057 7,268
(+) Depr. & Amort 1,833 1,851 1,870 1,889 1,907 1,927
(-) ∆ NWC 388 391 394 396 398
(-) CAPX 2,458 2,530 2,593 2,658 2,724
Free Cash Flows 4,980 4,673 4,386 4,116 3,863 46,788
Enterprise Value: $69 WACC: 9.5% Current Share Price: $127.17
Estimated Share Price: $111
(Millions)
Less competitive products will decrease Boeing’s share
price to $111 despite a growing industry
27Short Term Industry Growth Products Valuation
32. Why Boeing is currently
overvalued
Aerospace industry
poised for growth
Inability to meet market
needs
Valuation
Boeing is currently overvalued; we expect Boeing to drop
to $111 per share in 15 years
Short Term Industry Growth Products Valuation
• Favorable current market conditions
• Historic backlog in plane orders
• Emerging markets in Asia, Middle East, and Latin American
• Global defense industry spending increasing
• Loss of key defense contracts
• Commercial airplanes are struggling against Airbus in a
two-player market
• Boeing is less competitive in a larger market
• The firm is poorly positioned for future long term growth;
within 15 years it will fall to $111.
31
33. Index of the Appendix
Short Term Industry Growth Products Valuation 32
Brexit
36 Brexit’s impact on Boeing (USD/GBP)
37 S&P 1500 (Airlines) vs. NYSE BA
Traffic Growth
34 Global traffic increase by market
35 South Asian market leads in traffic growth
45- China Air Traffic
50- Comm. Air LT Growth
Exchange Rates and Commodity Prices
41 Monthly Exchange Rates 2011-2016
42 Price of Aluminum
43 Titanium Historic Costs
44 Indexed Costs of All Raw Materials
Financial Data
39- Historical Stock Price
51- Expanded FCF
52- Beta and WACC
Market Competition
46- Wide Body Market
47- Narrow Body Market
48- Single Aisle Market
FleetGrowth
33 Growth, replacement, retained
Misc.
38- Average Ticket Price
40- Boeing Backlog
49- Comm. Air Deliveries
34. Older airplanes replaced with more efficient,
newer generation models as airlines refinance
Short Term Industry Growth Products Valuation
Airplanes
Source: Boeing Current Market Outlook
35. Short Term Industry Growth Products Valuation
Global traffic increase by market
Source: Boeing Current Market Outlook
36. South Asian market leads in traffic growth
Short Term Industry Growth Products Valuation
Source: Boring Current Market Outlook
37. Short Term Industry Growth Products Valuation
Brexit’s impact on Boeing
Fall of the USD to
the GBP, British
recession
Airlines vulnerable
to economic
conditions
Boeing loses
businesses from
impacted airlines
June 23, 2016
Brexit
Source: XE.com
38. Short Term Industry Growth Products Valuation
Fall of the USD to
the GBP, British
recession
Airlines vulnerable
to economic
conditions
Boeing loses
businesses from
impacted airlines
S&P 1500 (Airlines) vs. NYSE: BA
Source: Google Finance
39. Average Plane Ticket Price
Short Term Industry Growth Products Valuation 38
500
550
600
650
700
750
800
850
2009 2010 2011 2012 2013 2014* 2015*
PriceinU.S.Dollars
Year
Average Global Airfare Price
41. Boeing backlog
• Firms pay 1% of the order total when they place an order
• Costs increase as delivery date nears
0 500 1000 1500 2000 2500 3000 3500
737- 800A
777F
737-700
767-300F
737-900ER
787-9
777-300ER
787-10
777X
787-8
737-800
737 MAX
Backlog Breakdown By Model
Series1
Short Term Industry Growth Products Valuation 40
42. Monthly Exchange Rates 2011-2016
Short Term Industry Growth Products Valuation
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
Monthly Exchange Rates
USD/SDR USD/EUR USD/GBPSource: IMF Data, USFOREX
41
43. Price of Aluminum
Short Term Industry Growth Products Valuation
Source: The World Bank
1600
1700
1800
1900
2000
2100
2200
2300
2400
2500
2011 2012 2013 2014 2015
DollarsPerMetricTon
Year
Price of Aluminum
42
44. Titanium Historic Price
Short Term Industry Growth Products Valuation
Source: United States Geologic Survey
$0.00
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
2011 2012 2013 2014 2015
Price of Titanium (dollars per metric ton)
43
45. Cost of raw materials has decreased
making it cheaper to build and operate airplanes
Short Term Industry Growth Products Valuation
0
20
40
60
80
100
120
140
160
180
1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016
Raw Material Price 2011-2016
(2011 Values Indexed at 100)
Oil Aluminum Titanium
44
46. China domestic and international
aerospace traffic has increased
Short Term Industry Growth Products Valuation
0
100
200
300
400
500
600
700
800
900
1000
2007 2008 2009 2010 2011 2012 2013 2014
RevenuePerKilometers
Year
China Airline Passenger Traffic 2007-2014
China-China China-Europe China-NA China NE Asia China-Oceania China- SE Asia
45
47. Wide-body passenger airplanes products in
production or use
Short Term Industry Growth Products Valuation
Large Medium Small
Boeing 747-8 Boeing 777, 777X Boeing 767, 787-8, -9
Airbus A380 Boeing 787-10 Airbus A330-200, -300, -800, -900
Airbus A350-1000 Airbus A350-800, -900
Illyushin IL-96
Source: Boeing, Current Market Outlook 2014- 2034
46
48. Boeing’s narrow-body models dominate its
backlogs
Short Term Industry Growth Products Valuation
76.85%
12.79%
8.61%
1.37%
0.38%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
737 Family
787 Family
777 Family
767 Family
747 Family
Backlog Breakdown by Product Line
Source: Boeing Company Data
47
49. Single Aisle Passenger Airplanes Products in
Production or Use
Single Aisle Regional Jets
Boeing 737-600, -700, -800, -
900ER
AVIC ARJ-900 Antonov An-148, -158
AVIC ARJ-700
Boeing 737-MAX7, MAX8, MAX9 Bombardier CRJ-1000
Bombardier CS100, CS300
Bombardier CRJ
Airbus A318, A319, A320, A321 Embraer 190, 195
Comac C919
Embraer 170, 175
Mitsubishi MRJ
Airbus A319neo, A320neo,
A321neo
Tupolev TU-204, TU-214 Sukhoi Superjet 100
Source: Boeing, Current Market Outlook 2014- 2034
Short Term Industry Growth Products Valuation 48
50. Commercial aerospace deliveries will increase
Short Term Industry Growth Products Valuation
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F
NumberofAircrafts
Year
Commercial Aerospace Deliveries
Source: Deloitte, 2016 Global Aerospace and Defense Sector Outlook: Poised For a Rebound
49
51. Commercial airline industry is forecasted to
see consistent growth in the next 15 years
Short Term Industry Growth Products Valuation
0
100
200
300
400
Commercial Industry Growth, 2015-33 ($ Billions)
United States Asia Consolidated Total
50