LYNNWOOD, Wash. – The stock market may be caught in a downdraft, but things are looking up for the commercial airline industry – at least according to the Boeing Co.’s annual forecast.
“As we look at 2016, we see another good year,” Randy Tinseth, vice president of marketing for Boeing Commercial Airplanes, told industry executives here today at the Pacific Northwest Aerospace Alliance’s annual conference.
The trends that are pushing stock prices down – including a slowdown in China’s economy and a drop in oil prices – aren’t dimming Tinseth’s outlook. He noted that cheap oil means it costs less to fuel up planes.
“It adds to the bottom line of our customers, which is good,” Tinseth said.
As for China’s economy, Tinseth said the trends point to a cooldown in manufacturing but also a rise in consumption. That’s a positive for Boeing, since more consumer spending translates into more passenger air traffic.
“We haven’t seen a slowdown in the Chinese market,” he said.
Tinseth said Boeing’s analysts project a 2.7 percent rise in world gross domestic product this year, with trade growth estimated at 3 to 4 percent.
Both those figures would be an improvement on the past year’s performance (which was 2.4 percent and 1.4 percent, respectively). The figures are roughly in line with what the Conference Board projects for 2016.
Boeing expects the per-barrel price of oil to average between $40 and $50 per barrel in 2016, Tinseth said. That would be less than the $52 average for 2015, but more than the current price of a little more than $30 for Brent crude oil.
The numbers translate into projected worldwide profits of $36 billion for the airline industry in 2016, up from last year’s $33 billion, Tinseth said. That projection parallels this year’s airline industry outlook from the International Air Transport Association.
Looking farther down the road, Tinseth stuck with the upbeat 20-year prediction that Boeing issued last year: He estimated that the world’s airlines will need 38,000 new planes between now and 2034, with a total value of $5.6 trillion.
Although the big picture may sound rosy, Boeing is facing its share of near-term challenges. The air cargo market turned out to be weaker than expected last year, for example. That’s leading to further reductions in the production rate for 747 wide-body jets, which are often used for carrying cargo.
“Essentially, this market will come back when trade comes back,” Tinseth said.
Boeing is facing competition not only from Europe’s Airbus consortium, but also from smaller jet manufacturers in Brazil, China, Russia and Japan. For example, The Wall Street Journal reported this week that Seattle-based Alaska Air Group is getting ready to buy as many as 60 regional jets from Brazil’s Embraer SA for Horizon Air.
The fuel-efficient, single-aisle 737 MAX went on its first test flight less than two weeks ago, but it’s already chalked up 3,072 orders from 62 customers. “It had more customers at first flight than any other airplane,” Tinseth said.
The order list for the 737 MAX is lower than the current tally of nearly 4,500 jets for Airbus’ rival A320neo series. But Tinseth said current trends in the airline industry, including lower oil prices, could provide an extra boost for 737 sales.
“I think we’re really well-positioned,” he said.