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Boeing (BA) Forecasts 8.6K Commercial Jet Demand for China

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The Boeing Company (BA - Free Report) recently released promising projection figures for commercial jet demand in the Chinese aviation market. Per the forecast, China is poised to witness demand for 8,560 new commercial airplanes through 2042, buoyed by solid 11.4% growth expected in the nation’s air traffic.

Projection Highlights

China has largely contained the COVID-19 pandemic impacts on the air travel demand and is lately witnessing a strong domestic air travel recovery.

In light of such factors, Boeing expects China to contribute 20% of global airplane deliveries over the next two decades. The nation’s commercial airliner fleet is projected to surge, exceeding 9,600 aircraft, thus more than doubling its current size over 20 years.

The American jet giant further projects that the Chinese commercial aircraft market will need 1,550 widebody airplanes, 190 new freighter deliveries and commercial services valued at $675 billion for maintenance, repair, training and spare parts by 2042.

Benefits for Boeing

China remains a significant market for commercial aircraft. Boeing has long-standing relationships with its Chinese customers, who represent a key component of its commercial aircraft backlog.

As Boeing’s report suggests, China’s domestic aviation market is likely to become the world’s largest by 2042, driving the demand for approximately 6,470 single-aisle aircraft like the Boeing 737 Max family of aircraft. Such a strong demand forecast is likely to result in more order inflows for BA, thus boosting its revenue generation prospects.

Peer Prospects

Apart from Boeing, aircraft manufacturers in the industry that have an established position in the Chinese commercial aviation market and may gain from the flourishing demand are as follows:

Airbus (EADSY - Free Report) : The company enjoys significant demand in the region, with its service fleet in China rising to more than 2,100 aircraft up to 2023, implying more than 50% of the market.

In April 2023, Airbus reached an agreement in the region to expand the A320 Family’s final assembly capacity with a second line at its Tianjin site. The agreement will contribute to Airbus’ overall rate objective of 75 aircraft per month in 2026 throughout its global production network.

Embraer (ERJ - Free Report) : The company has been recently awarded the Type Certificate by the Civil Aviation Administration of China (“CAAC”) for its E195-E2 jets after the successful approval received from the authority for its E190-E2 in November 2022. The acquired certification by the CAAC is a step forward for the company in fulfilling its commitment to solidifying its position in China’s aviation market.

Price Performance

Shares of Boeing have rallied 40.4% in the past year against the industry’s fall of 7.5%.

Zacks Investment Research
Image Source: Zacks Investment Research

Zacks Rank & a Key Pick

Boeing carries a Zacks Rank #3 (Hold). One better-ranked stock in the same industry is Textron (TXT - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Textron’s 2023 sales suggests a growth rate of 7.7% from the prior-year reported figure. The Zacks Consensus Estimate for TXT’s 2024 sales calls for a growth rate of 5.8% from the prior-year estimated figure.

TXT has a long-term earnings growth rate of 11.7%. Shares of Textron have risen 21.5% in the past year.

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