Can You Guess Who Boeing's Biggest Customer Is?

Boeing's 737 airliner is the world's best-selling airplane -- this year, and for all time (so far). Image source: Boeing.

Who is Boeing's (BA 0.01%) biggest customer? The answer depends a lot on how you phrase the question, of whom you ask it -- and when you ask it.

Two years ago, for example, The Wall Street Journal took a look at Boeing's order book and concluded that with 314 planes on order each, Indonesia's Lion Air and America's Southwest Airlines were tied as Boeing's biggest customers. Last year, Mideast airline Emirates was the company giving Boeing the most business, ordering 150 widebody 777-X airplanes from Boeing, and promising to pay as much as $57 billion in exchange.

This year, the title of Boeing's biggest customer has shifted again. Ironically, it's shifted all the way over into Airbus' backyard, to Europe.

To Amsterdam.

To AerCap Holdings (AER 0.18%). Which is buying 100 Boeing planes.

AerCap who?
If you've never heard of AerCap, don't be embarrassed. Unlike Lion Air, Emirates, or Southwest especially, AerCap isn't a well-known airline brand. Rather, it's an airplane leasing company. Whereas actual airlines buy airplanes and use them to fly folks around, AerCap buys planes in order to rent them out to actual airlines.

According to S&P Capital IQ, AerCap customers include such well-known brand names as Air France and Air China, American Airlines and Aerolineas Argentinas -- and other airlines on up through the rest of alphabet. With 1,300 airplanes in its inventory, AerCap can cover a lot of territory.

AerCap what?
In furtherance of this leasing business, Boeing's latest report on plane orders taken in over the first half of 2015 shows that AerCap is its biggest customer so far this year. To date, AerCap has placed orders for no fewer than 100 of Boeing's single-aisle 737 commercial jets, nearly twice as many as the 737's second-biggest buyer (Panama's Copa Holdings).

In a press release issued last month, AerCap confirmed that the 737s it is buying are specifically of the "737 MAX 8" variety, an aircraft that lists for $110 million retail. Thus, AerCap's business promises to add as much as $11 billion to Boeing's order backlog. That makes AerCap far and away Boeing's most valuable customer so far this year.

AerCap how... much is it worth?
That's obviously good news for investors in Boeing. But what about AerCap itself? Could it also be a stock worth investing in?

The answer is "probably not."

As big as AerCap is, the stock doesn't seem to contain a whole lot of potential for investors to profit from. Although the stock doesn't look particularly expensive at first glance, sporting a P/E ratio of only 8.5, AerCap pays its shareholders no dividend. Its rate of profits growth, meanwhile, as estimated by Capital IQ, is a meager 4% annualized over the next five years. And while technically GAAP-profitable, Capital IQ data shows that AerCap is not actually generating any positive free cash flow at all. To the contrary, the company has run negative to the tune of about $615 million over the past 12 months.

Add to this (or rather, subtract) the fact that AerCap is carrying a debt load in excess of $30.2 billion, but has less than $1.6 billion in the bank, and AerCap Holdings stock looks like a particularly bad way to play an improvement in Boeing's business going forward. The better play, it appears, is to simply buy Boeing itself.