Aerospace & Defense

Boeing already makes billions selling airplanes – now it expects to make billions more fixing them

Key Points
  • Boeing wants to continue its push to not just build aircraft but to fix them, too.
  • The company's services unit, which Boeing spun out last year, brought in $3.9 billion in the most recent quarter.
  • CEO Dennis Muilenburg said Wednesday the aircraft services market is "a significant growth opportunity."
Value Boeing at $400 based on free cash flow yield: Analyst
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Value Boeing at $400 based on free cash flow yield: Analyst

Wanderlust is a goldmine for Boeing.

In Asia alone, 100 million new passengers a year are taking to the skies, according to CEO Dennis Muilenburg. Strong demand has helped fuel record orders for Boeing's airplanes, but the company is hoping to generate billions more fixing those aircraft.

Boeing's services unit — which it established as a standalone business last year — brought in $3.9 billion in the most recent quarter, growing 8 percent compared to the same quarter last year. The Boeing division is growing more than twice as fast as the broader aircraft services market, offering aircraft maintenance, data analytics and supply chain services.

"We aim to grow faster than the average services market growth of 3.5 percent as we further expand our broad portfolio of services offerings and continue to gain market share," CEO Dennis Muilenburg said on an earnings conference call Wednesday.

The company expects the global market of servicing commercial and government aircraft will be worth $2.6 trillion between 2017 to 2026. The steadily increasing demand for air travel means Boeing is creating demand in the services market with the hundreds of new airplanes it is producing each year. Muilenburg called this "a significant growth opportunity" for Boeing.

"We actually think the services could be a surprise to the upside," Jefferies analyst Sheila Kahyaoglu said on CNBC's "Squawk Box."

The unit could grow even more quickly than Boeing expects, especially due to the opportunities the company has to earn clients from its long list of aircraft customers. Combined with the high margins "some of the aftermarket suppliers," Kahyaoglu said the business "could have significant runway."

"The profitability there is 15 to 16 percent," Kahyaoglu added.