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Boeing Sees Market Growth Slowing on Fewer Jumbo Jets

July 03, 2012

Boeing Sees Market Growth Slowing on Fewer Jumbo Jets

A Boeing Co. 787 Dreamliner before delivery to launch customer All Nippon Airways Co. (ANA), at the company's facility in Everett, Washington. Photographer: Stuart Isett/Bloomberg

Boeing Co. (BA:US) said growth in industry plane deliveries will slow in the next 20 years as demand for jumbo jets and freighters wanes, with the global fleet expanding at less than a fifth of the rate predicted in 2011.

Airlines will take 34,000 new planes valued at $4.5 trillion through 2031, Chicago-based Boeing said today. That’s a 1.5 percent increase from a 33,500-jet estimate last year, when the planemaker raised its two-decade forecast by 8.4 percent.

Boeing gives its 20-year prediction annually, offering a glimpse of how it sees the market for new aircraft and airlines’ passenger and cargo traffic. While sales of twin-aisle jets will increase, orders will slow for the largest such planes, its own 747 and Airbus SAS’s A380 superjumbo, the company said.

“The forecast reflects the economic struggles we see today in some of the mature markets,” Randy Tinseth, Boeing’s vice president of marketing, said in a press briefing in London. “The economic growth rate for this forecast is down.”

Fuel bills for four-engine planes such as the 747 and double-decker A380 have been pushing airlines toward longer- range twin-engine models that burn less kerosene. Orders last year for Boeing’s 777 reached a record 202, while the new 747-8 had only seven sales, according to Boeing’s website.

Fewer Sales

There also will be fewer sales of narrow-body planes, according to the forecast, which accounts for new models from planemakers in China, Canada and Russia. That category, which includes Boeing’s 737, makes up the bulk of the global fleet.

“One or two” new competitors will gain traction in that segment near the end of the 20-year period, Tinseth said. He said Boeing’s 737 MAX model, revamped with new engines, will be good enough to keep market-share parity with Airbus’s A320neo. Airbus Chief Operating Officer John Leahy said yesterday that his goal is to win 60 percent of the global market for single- aisle planes within the next few years.

Demand is strongest in Asia, where Boeing predicted buyers will get 12,030 new planes by 2031, a 5.1 percent jump from the 2011 forecast. Boeing now sees fewer purchases in North America, Latin America and the Middle East than a year earlier. It cut the North America forecast by 3.2 percent to 7,290 planes.

Passenger traffic will rise about 5 percent a year in the next two decades, Boeing predicted. The U.S. planemaker and Toulouse, France-based Airbus are pushing output to record levels to trim backlogs of more than 8,000 jetliners, representing more than seven years of work at current rates.

‘Continued Challenges’

“We do expect continued challenges in the European market and general economy this year and next year,” Tinseth said on a conference call. “Once the economy gets back on its feet, we expect continued growth moving forward.”

Boeing shares (BA:US) are unchanged in the past year, compared with a 24 percent gain for those of Airbus parent European Aeronautic, Defence & Space Co. Boeing rose 1.5 percent to $74.27 at the close today in New York, while EADS fell 0.2 percent to 28.43 euros in Paris.

While Boeing’s forecast predicts only a 1.5 percent gain in aircraft numbers versus last year’s outlook, the value of those planes will rise by almost 13 percent as airlines opt for larger jets, which are more expensive, Tinseth said.

The average plane will get about 5 percent bigger during the next 20 years, Tinseth said. That will shift the “middle of the market” to jets equivalent to an 185-seat Airbus A321 or 737-900ER, compared with a 150-seater now such as an A320 or 737-800.

Boeing cited a “sluggish” cargo market in paring its forecast for jet freighters. Until last week’s order by FedEx Corp. (FDX:US), Boeing hadn’t sold any cargo aircraft this year, and the market remains “volatile,” Tinseth said.

Cargo traffic will gain 5.2 percent annually, down from a previous forecast of 5.6 percent, the planemaker predicted.

Boeing has issued annual 20-year forecasts since 1964. In 2009, the company reduced its outlook for the first time in at least a decade as carriers canceled and deferred orders because of a travel slump in the recession. The following year’s report bumped the projection up by 6.6 percent.

To contact the reporters on this story: Susanna Ray in Seattle at sray7@bloomberg.net; Chris Jasper in London at cjasper@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net; Chad Thomas at cthomas16@bloomberg.net


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