LYNNWOOD, Wash. — One of Boeing’s top market analysts says the concerns stirred up by China’s Wuhan coronavirus outbreak will affect airline profitability, passenger air traffic — and the economy as a whole.
Randy Tinseth, vice president of marketing at Boeing Commercial Airplanes, said that effect is likely to throw an additional twist into his generally optimistic outlook for the aviation market in 2020.
He laid out Boeing’s outlook for the next year, and for the next 20 years, today during the Pacific Northwest Aerospace Alliance’s annual conference at the Lynnwood Convention Center.
Coming into 2020, Tinseth said his outlook called for 2.5% to 2.7% growth in gross domestic product, 4.5% to 5.5% growth in passenger air traffic, relatively constant oil prices and an overall situation that should be profitable for airlines. But he stressed that those numbers don’t reflect the potential dampening effect due to coronavirus concerns that have arisen around the world over the past few weeks.
“That virus will run its course,” he said. “Frankly, it will have an impact here. I think it’ll have an impact on GDP growth. It will have an impact on traffic growth. And I think especially as we look at our customers today, it will have an impact in terms of profitability.”
Tinseth didn’t paint a doom-and-gloom picture, however. He said the impacts could change his overall projections for the year by “a little bit.”
Another factor that figures prominently in Boeing’s outlook for the year has to do with the worldwide grounding of the company’s 737 MAX jets, which has been in effect since last March due to two catastrophic airplane crashes. “It’s hard for me to put into words how difficult the last year was for us at Boeing,” Tinseth said.
He acknowledged the pain that the crisis has caused for the families of the victims, as well as for Boeing’s suppliers and airline customers. “I want to apologize for that,” Tinseth said.
Boeing’s current expectation is that changes in the 737 MAX and in pilot training procedures will win regulatory approval by mid-2020, clearing the way for hundreds of planes to start to return to service. But Tinseth stressed that recertifying the planes would be only the start of a months-long return to normalcy.
“We have a lot of work to do, and it’s going to take several quarters to make sure we get through this successfully,” he told the standing-room crowd.
In what has become an annual tradition at the PNAA meeting, Tinseth recapped his 20-year commercial market outlook for the aviation market. Among the highlights:
- New airplane deliveries are projected to amount to 44,040 jets, valued at a total of $6.8 trillion. Nearly three-quarters of those planes would be single-aisle jets like the 737, with larger twin-aisle jets accounting for 19%. Regional jets would account for 5%, and cargo freighters would account for 2%.
- The biggest market is expected to be in the Asia-Pacific region, with an estimated 17,390 deliveries through 2028. Tinseth said the region could account for more than half of the world’s economic growth over next 20 years. “Without question, this is a key part of our future,” Tinseth said.
- Airplane fleet services seem likely to “grow faster than the fleet,” Tinseth said, because airlines are becoming increasingly interested in outsourcing service and maintenance. That’s why Boeing created a separate business unit for aviation services back in 2016.
- Tinseth said his 20-year projections tend to assume that global markets will continue to liberalize and deregulate, helping to spur economic growth. “I can tell you in the last few years, the markets have been going in the wrong direction in terms of that.” he said. “The question is, how do those changes in policy impact the marketplace?”
Before the 737 MAX crisis arose, Boeing had been considering the introduction of what’s been variously called the New Mid-Market Airplane, NMA or 797. Tinseth noted that changes in the marketplace — and in the strategies being followed by Airbus, Boeing’s European archrival — have led Boeing executives to take a step back and reconsider their plan for the NMA.
“I think that’s the right thing to do,” he said.
That led a reporter to ask what the new focus of the plan for Boeing’s next airplane might be. “Oh, I know what the focus is,” Tinseth teased. “But I’m not going to share it with you.”