Boeing Issues 20-Year View For Jetliner Demand In Middle East

The Boeing Co. (NYSE:BA) released the 20-year forecast for jetliner demand in the Middle East at the Dubai Air Show. This projection was based on Boeing’s belief that political disorder and issues plaguing the three big Gulf carriers will not affect its business in the region.

The Latest Forecast

Per the company’s latest outlook, the Middle East will need 3,350 new planes worth $730 billion between 2017 and 2036. Boeing expects twin-aisle airplanes to comprise nearly 50% of the total projection in the same region. This, in turn, translates into $520 billion, which is over 70% of the total value.

Again, Boeing projects single-aisle jets to comprise over 50% of the total deliveries in the Middle East. The company forecasts demand for 1,770 single-aisle airplanes, valued at $190 billion, driven by growth of low-cost carriers.

Overall, this world’s leading commercial aircraft maker anticipates the commercial fleet to be fueled by sustained 5.6% annual growth in commercial passenger traffic.

Deals Signed at the Ongoing Dubai Air Show

Demand for Boeing’s commercial airplanes has been on the rise owing to a steady increase in passenger and freight traffic. Recently, at the Dubai Air Show, Boeing received an order from the Kuwait-based ALAFCO Aviation Lease and Finance Company for 20 additional 737 MAX 8s, valued at $2.2 billion, at current list prices. Additionally, the company received an order for five more 787-8 Dreamliners and a commitment to purchase two large freighters, valued at approximately $1.9 billion at list prices, from Azerbaijan Airlines.

Apart from this, Boeing sealed a deal for delivering 40 787-10 Dreamliners to Emirates — the largest airline in the Middle East. The purchase order, in addition to the 40 jets, comes with equipments related to the 787-10 fleet, with a total value of $15.1 billion as per the current list price. Given the enormous commercial demand in the market, this aircraft maker stands to witness significant traction, especially in the single-aisle market.

Boeing’s Global Market Outlook

In June 2017, Boeing raised the 20-year forecast for global jetliner demand by 3.6% at the Paris Air Show. This projection was based on a promising Asian market and growing need for the improvement of fuel-efficient, single-aisle airliners.

Per its outlook, the world will need 41,030 new planes worth $6.1 trillion between 2017 and 2036. This figure is projected slightly above last year's estimated demand of 39,620 jets worth $5.9 trillion for the 2016-2035 timeframe.

Markedly, Boeing expects single-aisle jets to be the major driver behind demand growth, comprising 72% of the total projection. This translates into worldwide demand for 29,530 single-aisle jets, worth $3.2 trillion, over the next 20 years. This figure reflects a 5% increase over last year's projection.

Trailing behind single-aisle jetliners are their large wide-body, twin-aisle counterparts. In this regard, Boeing projects demand for 9,130 new planes in the 2017-2036 period. The company estimates that the total value of all wide-body planes (comprising small, medium or large) sold over the period will be $2.8 trillion compared with $3.2 trillion for the narrow-body variety.

Other Players in the Same Space

The single-aisle jets have been the main area of competition between Boeing and its arch rival, Airbus Group (PA:AIR) SE (OTC:EADSY) . Currently, these two aerospace behemoths are wooing the market with the updated versions of their popular single-aisle jets — Boeing’s new 737 MAX 10 against Airbus' new A321 neo.

Undoubtedly, Boeing and Airbus dominate the commercial aerospace manufacturing market as major airlines worldwide uses their airplanes. Nevertheless, Canada’s Bombardier Inc. and Brazil’s Embraer S.A. (NYSE:ERJ) are also in the commercial race although their presence in the market is negligible.

Price Movement

Share price of Boeing has surged 75% over the last 12 months, outperforming the broader industry’s gain of 34.5%. This could be because the company’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, ongoing share repurchases as well as earnings accretive acquisitions. Evidently, the stock’s performance is better than that of General Dynamics Corporation (NYSE:GD) , which missed the industry mark.

Zacks Rank

Boeing carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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