State of the industry

One of the questions that came up on the Boeing Company earnings teleconference with investors and reporters last week had to do with where we are in terms of the “cycle.”

I think my predecessor, Randy Baseler, did a good job a couple of months ago explaining what’s happening with the industry cycle. And this may be a good time to touch base again with where we see the industry right now in terms of performance.

photo

Strong passenger demand means record numbers of peope are expected to travel in August, according to IATA. This real-time display of air traffic at Boeing’s Customer Experience Center gives you a glance at all flights in progress around the globe.

First, we’re clearly still in the “up” part of the cycle. Whether the cycle will continue as it is today is always hard to predict. But we still see sound fundamentals moving in positive directions. In other words, if you take a look at the factors that drive our industry, we still see strong growth.

We’re seeing strong growth in economies around the world, strong growth in traffic, high load factors, high airplane utilization, and growing revenue. There are, of course, continuing challenges with cost pressures and high fuel prices, but again, coupled with strong passenger demand and positive earnings.

In fact, this earnings season has been good for airlines around the world. We’re seeing a very positive trend with solid 2nd quarter earnings reports for major U.S. carriers, such as Delta and United, and for big carriers in other regions, such as Lufthansa, Ryanair, Singapore, ANA, and the list goes on.

Many of the airlines say they’re having their highest revenues ever - results that demonstrate that the airline industry is in the midst of a strong recovery.

Rising profits and improved financial health for airlines around the world, and particularly in the U.S., will enable them to renew their fleets and to grow.

IATA, an international trade organization for the airlines, has just posted its report card for the halfway mark of 2007, with the news that passenger traffic grew 6.3% over last year – with load factors at record levels. What we see is that traffic, in fact, is growing faster than the capacity being added to the system.

IATA is projecting that this year will be the first year since 2000 in which the airline industry will achieve profitability. And next year, IATA forecasts close to a $10 billion profit for the industry – which would be a record.

Bottom line: the state of the industry continues to be good, and we’re looking forward to continued strength through this year and into 2008. We’ll keep watching. But all the signs continue to point to a longer cycle.

Comments (3)

Chris C (South Africa):

Boeing Commercial Airplanes are clearly the best-suited airplanes to help this dynamic aviation industry grow, as well as to make the industry more fuel-efficient and economical. With air-travel mushrooming, Boeing Commercial Airplanes are ideally suited to give the passengers their preferred solutions of air-travel needs; safer, quicker, and quieter; more frequencies, more comfortable, more reliable and direct point-to-point flights. Furthermore, Boeing Commercial Airplanes give the environment top attention, by offering the most fuel-efficient, economical and quietest airplanes in the industry, as well as giving the airlines and investors maximum flexibility and profit potential.

Congratulations on securing a further two Boeing 747-8 Freighter orders! The 747 will remain the preferred airplane in the ultra-large airplane segment, period. No doubt that the 467-seat 747-8I will garner many more orders this year!

Everett (Beijing,China):

I hope the state of the industry will continue to be good. And I hope the profits of airline industry will keep rising. Best wishes and more profit to airline industry. More orders to the Boeing Company.

Eric (www.freightdawg.com):

Congratulations on the excellent order book Boeing has maintained. Clearly airplanes like the 737 and the new 787 are driving orders! One thing I would like to point out though is that airline health has been artificially helped by bankruptcy absolution of debt.

Nevertheless, I am highly excited by the new class of products that Boeing will be producing in the coming years. I'm a weekly air traveler. I have a vested interest in Boeing's continued success!


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