~~~^~~~
Well-known member
- Joined
- Dec 21, 2001
- Posts
- 6,137
Boeing Optimistic Despite Record Oil Prices
Jul 13, 2008
#content td div img { padding-right:10px; padding-bottom:2px}html.ie6 #content td div img { padding-right:10px; padding-bottom:0px; }div.storyContent p { margin-top: 2px; margin-bottom: 14px;}html.ie6 div.storyContent p { margin-top: 0px; margin-bottom: 10px;}#mainNav { margin-top:0px;}By Michael Mecham
Gloomy headlines may proclaim oil around $150 a barrel, but Boeing says travel is so essential to the world's economy that airplane sales should top $3 trillion in the next 20 years. And, besides, it figures oil prices will average only half current rates.
In its annual market review, the company forecasts demand for 29,400 new airplanes through 2027 valued at $3.2 trillion, an uptick over last year's prediction of 28,600 orders valued at $2.8 trillion.
Of the 35,800 aircraft Boeing expects to be in service worldwide in 2027, only 6,400 will be retained from current fleets. About 12,500 of the new aircraft will be bought to cover increased demand, while 16,900 will be needed as replacements for today's fleet.
Vice President Randy Tinseth acknowledged that oil prices of $150 per barrel are far higher than projected a year ago, but says forecasters consulted by the company, particularly Market Insights Corp., see them as a bubble. It says they should average $70-80 per barrel.
For Boeing, the big question is not what high oil prices do to ticket prices and airline profits in the short term, but how much they affect the world's economies in the long term, says Tinseth, Boeing's chief of marketing.
In that regard, he says, market fundamentals remain sound. The company projects the world economy growing an average 3.2% yearly in the 2007-27 forecast period, up 0.1% from last year. Boeing projects airline traffic to exceed the baseline gross domestic product (GDP) numbers. As it did last year, it forecasts 5% annual airline growth, as expressed in revenue passenger kilometers.
Boeing Chairman and CEO Jim McNerney is bullish as well, calling commercial airplanes a growth business.
Boeing's forecasters have cooled a bit on air freight. They now project growth at 5.8% a year rather than last year's 6.1%, a reflection of the industry's heavy reliance on older, less-efficient aircraft that's driving up costs.
Tinseth discounts speculation that Boeing may face an onslaught of cancellations. So does McNerney, who notes that only 10-11% of the company's $271-billion backlog, which has quadrupled from the depths of the 2001-04 industry slump, is from U.S. carriers. They've had the hardest time adjusting to sudden rises in fuel prices, partly because the dollar's exchange rate is so weak.
"The vast majority of our record backlog is in places where you don't have the [weak] dollar impact on oil, which some would say [adds] 30%" to its price, McNerney told Aviation Week & Space Technology (see p. 74). Once oil's price adjusts down, "I think a lot of carriers will be able to afford new technology."
This year's Commercial Market Outlook underscores trend lines from the past, including the likelihood that regional jet (fewer than 90 seats) orders will decline, that the market's strength is in the overlapping single-aisle (90-240-seat) and wide-body (180-400-seat) categories, and that four-engine widebodies seating more than 400 passengers will not be a major market force.
In comparing 2007 actual data with 2027 projections, the forecast says:
* The market share for regional jets will drop, reflecting upgrades in gauge as airlines replace 50 seaters with 70 seaters and so on up through the single-aisle market (see chart). Regionals will account for 2,510 new orders valued at $80 billion, 9% of the total aircraft, but just 2% of the market's total value.
Similarly, Tinseth expects seat migration in the single-aisle market as customers move from 126-seat 737-700s to 162-seat 737-800s or 220-seat 737-900ERs.
But widebodies will be steadier because mid-sized twin-engine aircraft are more efficient than four-engine transports, he says.
* Single-aisle transports, the industry's workhorses, will gain from up-gauging from regionals. The segment is the industry's largest with 65% of total aircraft ordered, although they represent only 43% of value. Boeing forecasts 19,160 new orders valued at $1.36 trillion.
One reason for growth in this category is accelerated retirements of MD-80s, 737 classics and older A320s because their fuel demands and maintenance costs are higher than newer 737 NGs or A320s.
Airbus and Boeing have penciled in 2018 as a likely launch for their single-aisle replacements. Tinseth expects a third competitor but doesn't know who. Manufacturers in a half-dozen countries want to compete in this market.
* Twin-aisles will continue to be the industry's biggest moneymakers even if they rank second in aircraft in service at 23%. The 6,750 airplanes added during the period will be valued at $1.47 trillion.
* Large widebodies - 747s and A380s - will represent just 3% of new orders but be valued at $290 billion, or 9% of the market.
Jul 13, 2008
#content td div img { padding-right:10px; padding-bottom:2px}html.ie6 #content td div img { padding-right:10px; padding-bottom:0px; }div.storyContent p { margin-top: 2px; margin-bottom: 14px;}html.ie6 div.storyContent p { margin-top: 0px; margin-bottom: 10px;}#mainNav { margin-top:0px;}By Michael Mecham
Gloomy headlines may proclaim oil around $150 a barrel, but Boeing says travel is so essential to the world's economy that airplane sales should top $3 trillion in the next 20 years. And, besides, it figures oil prices will average only half current rates.
In its annual market review, the company forecasts demand for 29,400 new airplanes through 2027 valued at $3.2 trillion, an uptick over last year's prediction of 28,600 orders valued at $2.8 trillion.
Of the 35,800 aircraft Boeing expects to be in service worldwide in 2027, only 6,400 will be retained from current fleets. About 12,500 of the new aircraft will be bought to cover increased demand, while 16,900 will be needed as replacements for today's fleet.
Vice President Randy Tinseth acknowledged that oil prices of $150 per barrel are far higher than projected a year ago, but says forecasters consulted by the company, particularly Market Insights Corp., see them as a bubble. It says they should average $70-80 per barrel.
For Boeing, the big question is not what high oil prices do to ticket prices and airline profits in the short term, but how much they affect the world's economies in the long term, says Tinseth, Boeing's chief of marketing.
In that regard, he says, market fundamentals remain sound. The company projects the world economy growing an average 3.2% yearly in the 2007-27 forecast period, up 0.1% from last year. Boeing projects airline traffic to exceed the baseline gross domestic product (GDP) numbers. As it did last year, it forecasts 5% annual airline growth, as expressed in revenue passenger kilometers.
Boeing Chairman and CEO Jim McNerney is bullish as well, calling commercial airplanes a growth business.
Boeing's forecasters have cooled a bit on air freight. They now project growth at 5.8% a year rather than last year's 6.1%, a reflection of the industry's heavy reliance on older, less-efficient aircraft that's driving up costs.
Tinseth discounts speculation that Boeing may face an onslaught of cancellations. So does McNerney, who notes that only 10-11% of the company's $271-billion backlog, which has quadrupled from the depths of the 2001-04 industry slump, is from U.S. carriers. They've had the hardest time adjusting to sudden rises in fuel prices, partly because the dollar's exchange rate is so weak.
"The vast majority of our record backlog is in places where you don't have the [weak] dollar impact on oil, which some would say [adds] 30%" to its price, McNerney told Aviation Week & Space Technology (see p. 74). Once oil's price adjusts down, "I think a lot of carriers will be able to afford new technology."
This year's Commercial Market Outlook underscores trend lines from the past, including the likelihood that regional jet (fewer than 90 seats) orders will decline, that the market's strength is in the overlapping single-aisle (90-240-seat) and wide-body (180-400-seat) categories, and that four-engine widebodies seating more than 400 passengers will not be a major market force.
In comparing 2007 actual data with 2027 projections, the forecast says:
* The market share for regional jets will drop, reflecting upgrades in gauge as airlines replace 50 seaters with 70 seaters and so on up through the single-aisle market (see chart). Regionals will account for 2,510 new orders valued at $80 billion, 9% of the total aircraft, but just 2% of the market's total value.
Similarly, Tinseth expects seat migration in the single-aisle market as customers move from 126-seat 737-700s to 162-seat 737-800s or 220-seat 737-900ERs.
But widebodies will be steadier because mid-sized twin-engine aircraft are more efficient than four-engine transports, he says.
* Single-aisle transports, the industry's workhorses, will gain from up-gauging from regionals. The segment is the industry's largest with 65% of total aircraft ordered, although they represent only 43% of value. Boeing forecasts 19,160 new orders valued at $1.36 trillion.
One reason for growth in this category is accelerated retirements of MD-80s, 737 classics and older A320s because their fuel demands and maintenance costs are higher than newer 737 NGs or A320s.
Airbus and Boeing have penciled in 2018 as a likely launch for their single-aisle replacements. Tinseth expects a third competitor but doesn't know who. Manufacturers in a half-dozen countries want to compete in this market.
* Twin-aisles will continue to be the industry's biggest moneymakers even if they rank second in aircraft in service at 23%. The 6,750 airplanes added during the period will be valued at $1.47 trillion.
* Large widebodies - 747s and A380s - will represent just 3% of new orders but be valued at $290 billion, or 9% of the market.
