Boeing, the leading commercial aerospace giant, has recently published its annual commercial market outlook for the upcoming years. Surprisingly enough, the demand for new planes surpasses the company’s earlier projections for 2022. The primary factor driving this increased demand is the rapidly growing travel industry in China.
According to Boeing, China is expected to require a staggering 8,560 new commercial airplanes by 2042, which shows a significant increase from last year’s projection of 8,485 planes. Currently, there are less than 4,000 planes operating within the Chinese airspace. This substantial growth will also generate a demand for aviation services worth $675 billion, including maintenance and training. Additionally, it is projected that 433,000 new personnel will be needed to meet these demands, including 134,000 pilots.
The primary reason behind this surge in demand for planes is the increasing number of people opting for air travel. Boeing predicts that commercial air travel in China will experience an average annual growth rate of over 11% for the next 20 years, making it the fastest-growing region worldwide. In comparison, travel demand in North America is expected to grow at a more moderate rate of approximately 4% per year. This slowdown can be attributed to the region’s mature travel market. Currently, there are around 8,000 jets flying in the Americas, and Boeing projects this number to rise to about 12,000 by 2042.
On a global scale, there are currently approximately 24,500 commercial jets in service. However, this number is set to double within the next two decades, reaching around 49,000 planes. Boeing estimates that around 6,000 planes from the existing fleet will still be operational, while 21,000 new planes will replace older aircraft and an additional 21,000 planes will be added to meet the growing travel demand.
The latest outlook suggests a demand for approximately 42,000 new planes over the next 20 years, which is an increase of around 1,000 planes compared to the 2022 projection. This translates to an average annual demand of about 2,100 planes. To put this in perspective, Boeing and its main competitor Airbus together delivered a record-breaking total of 1,606 planes in 2018. Analysts anticipate that combined deliveries will reach around 2,000 units by 2026.
Overall, Boeing anticipates a consistent rise in demand for planes, averaging about 4% annually. In 2003, the global commercial fleet consisted of approximately 17,000 planes. At that time, Boeing projected that this number would double to around 34,000 by 2022. However, the actual growth rate of the global fleet only averaged around 2% annually.
Boeing’s latest market outlook underscores the growing importance of China’s travel industry and highlights the significant demand for new aircraft in the coming years. As air travel becomes more accessible and global economic growth continues, it will be intriguing to see how these projections materialize in reality.
Boeing’s Growth Outlook and Stock Performance
Boeing, a leading aviation manufacturing giant, has released a positive outlook on its future growth and economic prospects. While investors usually do not respond significantly to long-term projections, a closer look at Boeing’s stock performance reveals that doubling the growth rate may not be necessary for the stock to thrive.
Over the past 20 years, Boeing’s stock has experienced a remarkable journey, with an average annual fleet growth of 2%. This growth has translated into a substantial gain of about 540% for shareholders during this period, averaging around 9% per year excluding dividends. Comparatively, the S&P 500 has recorded an average annual gain of 8% over the same time frame.
Although long-term growth remains important for Boeing, short-term factors like the performance of the Chinese economy also play a significant role. Boeing’s recent forecast reflects optimism about Asia’s largest economy, which has faced concerns of a slowdown affecting global markets, including the S&P 500.
Despite the near-term impact of the pandemic on China’s growth, Boeing anticipates that the country’s expanding economy will drive increased domestic air travel and freight. This projection is particularly beneficial for China’s thriving e-commerce sector, which experienced its own challenges during the economic downturn.
According to Darren Hulst, Boeing’s Vice President of Commercial Marketing, domestic air traffic in China has already exceeded pre-pandemic levels, and international traffic is steadily recovering. As China’s economy and air travel continue to grow, Boeing’s comprehensive range of commercial jets will play a pivotal role in supporting and sustaining this expansion.
In conclusion, while doubling the growth rate would be advantageous for Boeing’s stock, historical performance demonstrates that steady growth rates have already propelled significant gains. Additionally, the positive outlook on China’s economy and its impact on Boeing’s operations further augments confidence in the company’s future prospects.
