State-owned airline, Air India, is likely to receive its first 787 Dreamliner aircraft from The Boeing Company (NYSE:BA) next week, according to an announcement by the company, which was reported by the Daily News. The Boeing 787 Dreamliner is a long-range, wide-bodied twin-engine aircraft that seats from 210 to 290 passengers as per the variant.
Boeing’s South Carolina plant at North Charleston has three of the aircraft completed, of which is expected to deliver one next week. “What I can tell you right now is that the Air India delivery team is here in South Carolina for the delivery that’s scheduled for next week,” spokeswoman Candy Eslinger said.
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The transaction with India has been bugged with delays and disputes ever since Air India placed an order for 27 Dreamliners in 2005. Deliveries were delayed by over three years due to problems faced by The Boeing Company (NYSE:BA) on its supply chain, and other technical difficulties. Once these were overcome and Boeing neared commencement of deliveries, a dispute arose over the amount of compensation for the delay. This was thrashed out and finally approved by the Indian Government by August 3, paving the way for deliveries to start.
The three completed Dreamliners at North Charleston include two that have been assembled in Washington. The third has been assembled in South Carolina. The Boeing Company (NYSE:BA) decided in October 2009 to build a non-union final assembly line in North Charleston as a foil to the Dreamliner headquarters in the Puget Sound. The facility was inaugurated in June 2011, and planes are being assembled there on a regular basis since then.
Meanwhile, the aircraft will enter scheduled service November 4 with United Airlines, whose parent is United Continental Holdings Inc (NYSE:UAL). The airline will take delivery of the first Dreamliner in September after a long delay, and deploy it on hub routes connecting the largest U.S. cities. “While the Dreamliner’s superior operating economics make it ideally suited for international routes, we’re pleased to have this opportunity to introduce it on domestic flights,” says Grant Whitney, United’s managing director of scheduling, in its press release.
The much-maligned delays on the 787 have taken a toll on Boeing’s reputation. However, research analysts from Imperial Capital have an In Line rating on the company, and a price target of $82. At the time of writing Boeing quotes at $70.63. According to Imperial, The Boeing Company (NYSE:BA) is now executing 787 deliveries with greater confidence and may benefit from the removal of more costs from the supply chain. On the other hand most of the good news may already be priced into the stock – hence the in-line rating. Though there are expectations for higher dividends and share buybacks, these may not fructify in case of competing demands for cash in the newer aircraft programs, such as the 737MAX and the 787-10. Given these factors, the stock may yet perform exceeding expectations, provided it uses cash strategically, which may not be possible given new plane programs as aforesaid.
Imperial’s target of $82, over a one year time frame, is based on the average of a 16x EPS multiple and an 8.8x EBITDA multiple for estimates over the next twelve months.