Thursday, March 10, 2016

Why Boeing Thinks It's Different This Time

At the recent Barclays Industrial Select Conference, The Boeing Company CEO Dennis Muilenburg argued that the aerospace industry was "differentiated" and had different growth dynamics compared to other industrial sectors. Given the industrial slowdown in the global economy, this means he sees aerospace as able to buck the trend. Is he right, or are aerospace investors heading for a disappointment in 2016?

3 reasons aerospace demand will growFocusing on commercial aerospace, you can separate Muilenburg's case into three somewhat related parts:
  • Ongoing airline profitability will lead to commercial aircraft orders as the two are correlated.
  • Low oil prices increase airline profitability, and airlines buy new planes for more reasons than just fuel efficiency.
  • Markets such as China are "underserved" and therefore capable of growing more than GDP.
Let's take a closer look at each argument in turn.


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