Boeing (BA) Industry Analysis

Industry Analysis Sector: Industrials Industry: Aerospace & Defense The Aerospace and Defense industry includes companies that are primarily involved in the design, manufacturing and support of Aircraft Carriers for commercial and military markets. Aircraft manufacturing is a highly competitive and capital intensive industry with two main players making up the bulk of the market. Boeing and Airbus, a subsidiary of EADS (Euro- pean Aeronautic and Defence Company) are the two largest manufacturers of commercial air- planes with combined revenues exceeding 80% of total industry revenues in 2012. While some companies have exposure either to military or commercial aircraft manufacturing, Boeing has a more balanced portfolio with 39% of its revenues coming from the military and the rest from commercial. Key Players European Aeronautic Defence and Space Company (EADS) Registered out of the Netherlands Airbus is the only major commercial aircraft manufacturer that competes in both commercial and defense segments with Boeing. EADS reported sales of $72 billion in 2012 with 86% coming from commercial business. Embraer Created on August 19, 1969. It has produced more than 5,000 aircraft and has operations in 80 countries. It has around 18,200 employees and had sales of $6.3 billion in 2012. Bombardier Only manufacturer among peers that manufactures both planes and trains. The company employs around 71,000 people and is headquartered in Montreal, Canada. The Aerospace division has 35,500 employees and produces business, commercial and amphibious aircraft. Defense Space & Security Lockheed Martin Corp (LMT): LMT is a global security and aerospace company. employs about 116,000 people. 2012 sales were $47.2bn It has operations in 75 countries. LMT's business is conducted primarily with the US Department of Defense and US federal government agencies. The company Northrop Grumman Corp (NOC): NOC is a global security company providing services and products to governments and commercial customers worldwide. Incorporated in Hawthorne, California in 1939 the company provides aerospace, electronics and information systems along with technical services. NOC sells products and services to customers in 25 nations. 2012 sales were $25.2 bn General Dynamics (GD): GD is a market leader in business aviation; combat vehicles, weapons systems and munitions; shipbuilding and marine systems; and mission-critical information systems and technology. GD's sales for 2012 were $31.5 bn Commercial Airplanes Market Cap Boeing Co Embraer Sa EADS Nv - Bombardier Inc 7% 50% 38% 5% Defense Space & Security Market Cap Lockheed Martin Corp General Dynamics Corp Northrop Grumman Co- EADS NV Boeing Co 26% 30% 22% 17% Trends Aircraft manufacturers' primary customers are the airline carriers and militaries around the world. The industry is heavily dependent on airline capex and military orders. Commercial business has been growing with the US airlines returning to profitability and ordering new planes to replace aging and inefficient fleets. Global passenger traffic growth is also creating a need for additional commercial aircraft however military segments for some of the companies are suffering due to austerity measures being implemented by developed nations. Passenger Growth Passenger traffic has been growing world-wide. According to International Air Transport Association (IATA) load factors for August achieved previous highs of 83.4% from July 2011. Passenger Traffic Growth August 2013 vs. August 2012 RPM* Growth ASM** Growth International 7.5% 5.6% Domestic 5.6% 5.7% Total Market 6.8% 5.6% YTD 2013 vs. YTD 2012 RPM* Growth ASM** Growth International 5.2% 4.4% Domestic 4.8% 4.2% Total Market Share 5.1% 4.3% Data Provided by IATA *RPM: Revenue Passenger Miles is a measure of actual passenger traffic ** ASM: Available Seat Kilometers measures available seat capacity Middle Eastern carriers were up the most, recording a 15% YoY increase in RPMS in August. The Asia-Pacific region grew 8.6% while European traffic rose 5.4% followed by African airlines at 5.4% and North America at 5.1%. Increased traffic has offset the slowing demand for freight and global airline sales have risen YoY since the beginning of 2011. Airlines Industry Sales (YoY % Change) 35% 30% 25% 20% 15% 10% 5% 0% 1QFY11 20FY11 3QFY11 4QFY11 1QFY12 20FY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 In the past 20 years air travel has been growing at 1.8 times the global GDP growth. 65% of total growth in passenger numbers in international market was from emerging economies and Asia/Pacific now constitutes as the largest air traffic hub based on 2012 RPKS followed closely by Europe and North America. Geographic Passenger Traffic (Measured as RPK's) - Asia/Pacific - North America - Africa - Europe - Middle East L. America 3% 5% 8% 29% 28% 27% While commercial airlines are growing, driven by rising passenger trattic, military revenues are down due to sequestration in the US and austerity measures in Western and Central Europe. According to the Stockholm International Peace Research Institute (SIPRI), a military watch dog group, global defense spending as a percentage of overall GDP declined by 1.1% in 2012. This is the first time defense spending has fallen as a percentage of GDP since 1998. BIDNESS Etc. SOURCES: Company Data, SEC filings, Bloomberg Professional Services DISCLAIMER: Bidness Etc(TM) and related marks are owned by Bidness Etc. Any other trademarks appearing on this webeite are the property of their reepective owners, and are not used to indicate the origin of goods or services offered or provided by Bidness Etc herein or to suggest approval for or affiliation with Bidness Etc. Commercial Aircraft