Boeing & The Aerospace Group: Set For Life (BA, GE, BEAV, ATI)

If you were born with a solid trust fund or if you won the lottery, you are probably set for the rest of your life.  If not, you will at least hope your name is Boeing (BA-NYSE) or that you do business with it.  The company has given some long-term figures for a 20-year outlook to 2026 and it is staggering.  Boeing has forecast that the worldwide demand over the next 20-years will be some 28,600 new airplanes with a total market value estimated at $2.8 Trillion.  The forecast last year to 2025 was for 27,210 new planes over the similar timeframe, with Russia and a few more markets being included.

There are of course some caveats, and you know pushouts can come at any time.  Asia Pacific is the largest increase and the rest is coming from increased passenger travel (traffic estimated up 5% annually) and increased cargo (traffic estimated up 6.1% annually).  Combined with the retained fleet, these new deliveries will result in a world commercial airplanes fleet of more than 36,400 airplanes by 2026.

On a delivery-dollar basis, the largest market is projected to be the Asia-Pacific region, with 36 percent of the $2.8 trillion total. North America will make up 26 percent of the delivery dollars, and Europe, Russia, and the CIS (Commonwealth of Independent States) will make up a total of 25 percent. Deliveries to airlines in Latin America, the Middle East, and Africa will represent the remaining 13 percent of the delivery dollars between 2007 and 2026.  Here is the breakdown of the estimates, and keep in mind that this is the commercial non-private market only:

3,700 regional jets, below 90 seats;
17,650 single-aisle airplanes, 90-240 seats, dual-class;
6,290 twin-aisle airplanes, 200-400 seats, tri-class;
960 airplanes 747-size or larger, more than 400 seats, tri-class.

Also, the push is not solely on these super-jumbo jets and the focus is going to be on more fuel efficient planes.  The 90 to 400-seat categories will account for almost all of the growth in air travel over the next 20 years. Airlines will continue to accommodate that growth by adding frequencies and nonstop flights — not by flying larger and larger aircraft.  Boeing is focused on offering new airplanes that burn less fuel and spend less time in maintenance.

Some of the go-to aerospace supply companies like Allegheny Technologies (ATI-NYSE) that supply much of the aerospace metals and BEA Aerospace (BEAV-NASDAQ) that make airline interiors and seating have to think this is music to their ears.  General Electric (GE-NYSE) is probably already licking their chops over the engine and service pacts that this will translate into.

Jon C. Ogg
June 13, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.