Boeing Projects Increased Demand Despite High Oil, Weak Economy

Source: http://feeds.feedburner.com/~r/USMoneyMorning/~3/331061058/
Posted on Wednesday, July 9th, 2008 | In Brazil, China, Current Market News, India, Russia

Contributed by: Money Morning (http://moneymorning.com) -

By Jennifer Yousfi
Managing Editor

The Boeing Co. (BA), one of Money Morning’s “Global Titans,” yesterday (Wednesday) released a report that predicted $3.2 trillion in aircraft sales over the next 20 years, as air travel picks up despite current price pressures.

“During 40 years of producing the Current Market Outlook, we have learned that the resilience of air transport growth comes from its intrinsic importance to the livelihood of people around the world,” the report from Boeing reads.

Boeing’s annual Current Market Outlook estimates that passenger travel will grow at a 5% rate, and cargo will grow at a 5.8% over the next several years. Despite record fuel costs, air travel and shipping has become an integral part of daily life for many consumers and businesses. Boeing says that demand will only grow.

A lot of that growth is expected to come from the BRIC nations.

“Long-term, you have to assume that the emerging countries of Brazil, China, India and Russia are going to continue to grow as a larger percentage of the world’s fleet, and they’re growing at a faster rate,” Peter Arment, Greenwich, Connecticut- based analyst with American Technology Research, told Bloomberg News.

Over one-third of the projected $3.2 trillion market is set to come from the Asia-Pacific region, which is expected to have $1.19 trillion in future airplane deliveries, according to Boeing data. North America and Europe are both projected to have $740 billion, while the Middle East region clocks in at $260 billion. Latin American demand is forecast at $140 billion.

In order to meet the upsurge in demand, Boeing estimates that planemakers will deliver 29,400 planes during the period, up from the 28,600 predicted last year.

The effects of the high cost of jet fuel was made apparent in Boeing’s upward revision to 43% from 38% for replacement aircraft as older, less fuel-efficient planes are retired in the face of soaring oil prices.

“We assume that fuel over the near term will continue to be high and volatile and then at some point in the future supply and demand should align and fuel will be priced more at the marginal rate of production,” Boeing Commercial Airplanes Vice President, Marketing Randy Tinseth said at a London press conference.

European rival Airbus SAS, a subsidiary of European Aeronautic, Defence & Space Co. (PINK: EADSY), released its own forecast in February, which was slightly lower than Boeing’s. Airbus expects airlines to buy 24,300 planes worth $2.8 trillion during the next 20 years, Bloomberg reported.

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