On Dec. 17, multi-metals producer Alcoa (NYSE:AA) announced it had won supply contracts from aircraft manufacturer Boeing (NYSE:BA) worth $2.5 billion for each of its platforms, including its newest commercial airplane, the 777X. Among the contracts is Alcoa's largest-ever fastener deal, which will see it serve as the exclusive supplier for three versions of Boeing's 787 Dreamliner, and seat track assemblies for all versions.
Does it matter?
Although there was no timetable laid out for the supply contracts, neither when they kick in or how long they will last, they are significant because of the number of orders for new planes both Boeing and rival Airbus are taking on. In October, Alcoa announced a $1 billion supply contract with the Boeing rival, which also included orders for fasteners.
While Alcoa is best known as an aluminum producer, earlier this year it acquired titanium and specialty metals producer RTI International Metals for $1.5 billion, which it said at the time broadened its appeal to aerospace manufacturers.
The expansion into titanium seems to be paying off already, as contracts RTI had previously won for seat track assemblies in 787-8 and 787-9 models going back to 2007 were largely responsible for its ability to gain the latest contracts with the 787-10. Alcoa notes that seat tracks are "critical structural assemblies that mount to the floor of the airplane, secure passenger seats and reinforce the structure of the fuselage." Titanium seat tracks are preferred because they offer better strength at lower weight, while providing better resistance against corrosion.
That's key for Boeing and Airbus, because carriers are looking for greater fuel efficiency in the latest models of planes they purchase.
Rich Duprey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.