Boeing Views Demand For 2.3K Jets In India For Next 20 Years

The Boeing Company (NYSE:BA) recently announced its new long-term forecast for India jet market, reflecting raised demand projections for the nation’s commercial airplanes, over the next 20 years. The new projection, representing a demand for 2,300 new commercial airplanes in the India market, is valued at $320 billion.

Thanks to a robust domestic economy prevalent in India, increasing domestic passenger traffic and rapidly expanding low-cost carriers (LCCs) have been primary growth drivers for the India jet market.

The new demand forecast of 2,100 planes worth $290 billion replaced the earlier expectation. Per the new projections, single-aisle aircraft continues to dominate the India aviation market, wherein Boeing expects to deliver 1,940 single-aisle aircraft for an estimated value of $220 billion. Likewise, the company expects to deliver 350 wide-body and 10 regional jets by 2037.

Boeing’s Prospects in India

In recent times, airline companies in India have been significantly increasing their fleet size to meet rigorous customer demands, due to the rising level of passenger and cargo traffic. According to the International Air Transport Association (IATA), the domestic India passenger traffic witnessed a 5.5% rise in September 2018 from the previous year, led by strong rates of economic expansion in the country.

According to Boeing's Commercial Market Outlook (CMO), India’s commercial aviation industry has achieved double-digit growth for 51 consecutive months. Notably, this year also Boeing has successfully inked a number of significant deals with its customers in India to aid the growing aviation market in the nation. For instance, in June, Boeing entered a $3.3-billion agreement with Vistara for delivering six of its 787 dreamliners to the airlines.

During the same period, SpiceJet also placed an order for 40 Boeing 737 MAX aircraft for $4.74 billion. A month later, Boeing and Jet Airways inked a deal worth $8.8 billion at list prices. Considering the latest forecast for the India jet market, we may expect Boeing to win more such deals from airlines in India, which would boost the company’s international revenue growth significantly.

Long-Term Scenario

From the long-term perspective, the India economy is currently expected to become the third largest economy in the world over the next two decades. This inevitably will spur the demand for new fuel-efficient short- and long-haul airplanes, resulting from the growth of India's middle class and its propensity to travel via air.

Interestingly, as more than 5% of the world's fleet is expected to operate in India by 2037, commercial services such as flight training, engineering and maintenance, digital analytics and others will continue to drive growth in the country’s commercial aviation industry. This, in turn, should entice commercial jet makers like Boeing and Airbus (OTC:EADSY) to expand their footprint in this nation.

Price Performance

Shares of Boeing have increased about 7.3% in a year against the industry’s decline of 6.7%. The outperformance was primarily led by significant demand for its military jets across the globe along with robust long-term demand for its commercial aircraft.

Zacks Rank & Other Stocks to Consider

Boeing currently carries a Zacks Rank #2 (Buy).

A few top-ranked companies in the same sector are Aerojet Rocketdyne Holdings (NYSE:AJRD) and Teledyne Technologies Inc. (NYSE:TDY) .

Both Aerojet Rocketdyne and Teledyne Technologies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aerojet Rocketdyne came up with average positive earnings surprise of 19.27% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has increased 43.3% to $1.82 in the past 90 days.

Teledyne Technologies came up with average positive earnings surprise of 12.92% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has increased 6% to $8.75 in the past 90 days.

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