Industry analyst Richard Aboulafia predicts tough years ahead, with Boeing depending heavily on increased 737 production as demand for its Everett-built twin-aisle jets slows and it struggles to fund development of the next airplane.<\/p>\n
The great boom in the aerospace industry is over, and in the next few years Boeing will have to make even bigger cuts to large jet production in Everett than it has publicly announced, aviation-industry guru Richard Aboulafia predicted Wednesday. <\/p>\n
His analysis for the Teal Group aviation-consulting firm predicts just 34 large twin-aisle 777s being delivered in 2020, less than three per month, compared with the lowest projection from Boeing of 42 deliveries per year, or 3.5 per month. <\/p>\n
As for Boeings hope to raise production of the 787 Dreamliner from the current rate of 12 per month up to 14 per month, Aboulafia declared himself a serious nonbeliever. <\/p>\n
Demand just isnt there in a twin-aisle-jet market that is flooded with way too many airplanes, he said. <\/p>\n
In a downbeat speech to an audience of local suppliers and local government officials at the Pacific Northwest Aerospace Alliance (PNAA) conference in Lynnwood, Aboulafia also said Boeing faces a real dilemma in how to make its next move against Airbus. <\/p>\n
And he spoke of a risk that the industry could slide from the current growth pause into outright recession if anti-trade and anti-globalization measures take hold around the world. <\/p>\n
While a gentle dip for the airliner market is most likely, Aboulafia said, the building of walls and trade barriers could take this rather fragile industry into bust-cycle territory that would hurt Boeing more than any other company. <\/p>\n
Referring to President Donald Trumps suggestion that the U.S. might slap a 45percent tariff on imports from China, Aboulafia said, Thats toxic. <\/p>\n
The easiest place for China to retaliate is Boeing jetliners, switching to Airbus, he said. <\/p>\n
A 12-yearlong boom in airliner-market growth came to an abrupt halt last year. The boom was driven by the high cost of oil, making new and more efficient planes more attractive, and the low cost of borrowing money to buy new aircraft. <\/p>\n
The price of oil fell. The cost of financing has crept up and looks likely to go higher. And meanwhile both Airbus and Boeing pumped out record numbers of airplanes, creating a glut in the widebody-jet market. <\/p>\n
Even the big, expansionist Gulf airlines have seen their revenue per passenger slump. When the Gulf carriers start to soften, you know you have an overcapacity issue, Aboulafia said. <\/p>\n
Luckily for Boeing, demand for single-aisle jets remains very strong, so Renton will continue to increase production between now and 2019, he predicted. <\/p>\n
As Boeing copes with the challenges of cutting production in Everett and raising it in Renton, it must also worry about its future competitive position against Airbus, Aboulafia said. <\/p>\n
He said Boeing will likely have to develop a new middle-of-the-market (MOM) twin-aisle jet sized between the largest 737 and the smallest 787 and also develop a larger 737, the MAX 10, to stall the runaway sales of the Airbus A321neo. <\/p>\n
The problem is, Boeing wont have the money to pour into a MOM development project until early next decade, Aboulafia said. All of Boeings research and development money is already earmarked through 2019 for its 737 MAX, 787-10 and 777X projects. <\/p>\n
In contrast, he said, Airbus is free of all major development spending from 2018 on, and may well choose to move ahead of Boeing with a MOM development project. <\/p>\n
Also holding Boeing back from new airplane development is the $27 billion overhang it still has in deferred production costs from its last new airplane project, the 787 Dreamliner. <\/p>\n
In the aftermath of this major money-losing effort, Aboulafia suggested Boeing corporate in Chicago could be gun-shy about doing something all-new and potentially loss-making. <\/p>\n
Always fluent and funny in his exposition, Aboulafia came up with a novel metaphor for Boeings pushing out nearly $30 billion in 787 production costs to be paid back from future revenue. <\/p>\n
Its like, We cant save the patient, but we can put his head in a jar and hope future generations can revive him, Aboulafia said. <\/p>\n
In the tough years ahead, he sees Boeing depending heavily on increased 737 production and further cost-squeezing. <\/p>\n
<\/p>\n
View original post here:<\/p>\n
Boom period for Boeing is over, leading analyst tells aerospace suppliers - The Seattle Times<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Industry analyst Richard Aboulafia predicts tough years ahead, with Boeing depending heavily on increased 737 production as demand for its Everett-built twin-aisle jets slows and it struggles to fund development of the next airplane. Continue reading