Boeing's (BA) Foolish Forecast: Airline Industry Awful, Aircraft Sales OK

It would make sense that with airlines canceling flights left and right due to high oil prices that Boeing would be looking a a grim year or two. Not so.

Boeing (BA) forecasts a $3.2 trillion market for new commercial airplanes over the next two decades, driven by an increasing demand for airplanes to replace older, less efficient aircraft. More than 30% of these orders are already on backlog.

Of course, Boeing could be wrong. It has had trouble estimating delivery times for its Dreamliner. It may not be any better at looking out two decades.

The greatest risk to the company’s estimates is that large airlines may not have the capital to lease or buy a huge number of planes, even if they are more efficient to operate. If several of the largest carriers go into Chapter 11, it is by no means guaranteed that they can support the market for new planes. New financing coming into bankrupt carriers might opt to get newer aircraft which cost less to operate. But, it is not clear how much capital there will be to go around if the current downturn gets worse. Having several carriers in line for financing at the same time might break the bank.

Counting on the Boeing forecast is a fool’s game.

Douglas A. McIntyre