Boeing to Buy Parts Maker for $1.7 Billion

Boeing Co. said Monday that it agreed to buy aerospace parts supplier Aviall Inc. for $1.7 billion, as the plane maker looks to expand its services operations in the wake of a boom in new plane orders.

The deal marks the first major corporate move by Boeing’s chief executive, W. James McNerney Jr., who took the helm 10 months ago.

Boeing is expanding its aviation services operations after a peak in commercial plane orders. Fueled by a resurgence in travel worldwide, the Chicago-based company took a record 1,002 commercial plane orders in 2005; European rival Airbus took 1,055.

But orders are expected to fall short of that mark this year, suggesting that in the next few years supplying parts and maintaining planes will become a more important part of plane makers’ operations.

Boeing’s Commercial Aviation Services unit is expected to bring in revenue of about $3 billion this year, which would grow more than 40% with the addition of Aviall. Boeing had total revenue of $55 billion last year.

Boeing said it would pay $48 a share in cash for Aviall, a 27% premium to Aviall’s closing price of $37.70 on Friday. Boeing said it would also take on about $350 million in Aviall debt.

The deal, set to close by the end of September, would not affect Boeing’s earnings this year but is expected to raise net income in 2007, Boeing said.

Aviall shares jumped $9.25, or nearly 25%, to $46.96 on Monday. Boeing shares rose 41 cents to $83.86.

Dallas-based Aviall, with annual revenue of about $1.3 billion, is the world’s leading independent distributor of new aviation parts to aerospace, defense and marine industries worldwide.

The company will become part of Boeing’s commercial aviation unit, which maintains airlines’ inventory of maintenance supplies, including spare parts, providing items only as needed to help cut costs for airlines.

Aviall’s parts-ordering and supply-chain management also will be used by Boeing’s defense unit, the company said.