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Boeing (BA) Raises 20-Year Jetliner Market Outlook by 4.1%

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The world’s leading commercial aircraft maker The Boeing Co. (BA - Free Report) raised the 20-year forecast for jetliner demand by 4.1% based on a promising Asian market and the growing need for the improvement of fuel-efficient, single-aisle airliners.

The Latest Forecast

Per its current outlook, the world will need 39,620 new planes, worth $5.9 trillion, between 2016 and 2035. This is slightly above last year's projected demand of 38,050 jets, worth $5.6 trillion, for the 2015–2034 period. Of the total units, 43% of the demand will be for the replacement of older, less-efficient aircraft.

Boeing expects single-aisle jets to be the major driver behind demand growth, comprising 71% of the total projection. This translates into worldwide demand for 28,140 single-aisle jets, worth $3.0 trillion, in the next 20 years.

Competition in the Single-Aisle Space

The expected growth in the single-aisle airplane segment is largely due to the global popularity of the low-cost carrier business model and the expansion of air service into emerging markets such as Asia, which is compelling airlines to accelerate the replacement of aged airplanes.

Note that these single-aisle jets have been the main area of competition between two arch rivals, Airbus Group SE (EADSY - Free Report) and Boeing. Both aerospace behemoths are set to deliver updated versions of their popular single-aisle jets – Boeing's new 737 MAX against Airbus' new A320 neo family of planes.

Other Categories

Trailing behind single-aisle jetliners are their large wide-body, twin-aisle counterparts. For this category, Boeing projects demand for 9,100 new planes in the 2016–2035 period. Even though the figure appears unimpressive, the price of these planes is almost enough to compensate for the difference in volume. The company estimates that the total value of all wide-body planes (comprising small, medium or large) sold over the period will be $2.82 trillion, compared to $3.0 trillion for the narrow-body variety. Meanwhile, regional jets will account for $110 billion in global sales.

Passenger & Cargo Traffic to Improve

Overall, Boeing anticipates the commercial fleet to double over the next two decades to 45,240 airplanes by the end of 2035, fueled by sustained 4.8% annual growth in commercial passenger traffic. About 40% of the total commercial demand is likely come from the Asian markets, another 40% from Europe and North America, and the balance from the rest of the world.

The Chicago-based aerospace manufacturer provided its 20-year forecast for average annual cargo traffic growth at 4.2%. Boeing anticipates that by the end of the period under consideration, the world will need 930 new freighters and 1,440 converted freighters.

Deals Signed at an Ongoing Airshow

Demand for Boeing’s commercial airplanes is on the rise due to a steady increase in passenger and freight traffic. Recently, at the Farnborough Air Show, Boeing signed a memorandum of understanding with Xiamen Airlines to supply 30 737 Max 200 jets. Moreover, China’s Donghai Airlines announced that it has plans to purchase 25 737 MAX 8s and 5 787-9 Dreamliners. Given the enormous commercial demand in the market, Boeing stands to witness significant traction, especially in the single-aisle market.

Zacks Rank & Key Picks

Boeing currently has a Zacks Rank #3 (Hold). A couple of better-ranked players in the aerospace and defense space include Northrop Grumman Corp. (NOC - Free Report) and Raytheon Co. , both carrying a Zacks Rank #2 (Buy).

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