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Published:
Tuesday, June 12, 2012
Boeing's eyes are on global economy, U.S. politics
Sales of airliners are strong and expected to continue, but a Boeing official tells business leaders the jetmaker is watching fuel prices, the world economy and U.S. politics.
By Michelle Dunlop
Herald Writer
EVERETT -- The future for commercial airliner sales looks bright, but several potential problems could darken the outlook, a Boeing Co. official said Tuesday.
"It all starts, for our business, with the economy," said Dave Gamrath, who works in market analysis at Boeing, speaking to about 40 local business leaders at an event hosted by Everett Community College and Economic Alliance Snohomish County.
Boeing keeps close tabs on not only the U.S. economy but the global one, since many of the jet builder's customers are foreign carriers. That diverse customer base was one reason Boeing was able to weather the 2008 economic downturn without significantly slashing jet output. Aircraft demand in regions like Asia and South America is increasing dramatically with the rise of the middle class there, leading Boeing to predict the world's airlines will need 33,500 new aircraft by 2030, Gamrath said.
That demand, however, could be tempered by a number of looming troubles, including fuel prices, Europe's financial instability and uncertainty over the U.S. economic recovery. For instance, volatile fuel prices could force airlines to curb expansion plans. For airlines, volatile fuel prices are even more difficult to manage than simply high fuel prices, Gamrath said.
Boeing, of course, hopes airlines will manage high fuel prices by buying more fuel-efficient jets, such as the company's 787 Dreamliner or the re-engined 737 MAX. But the company also is helping foster the development of biofuels to stabilize fuel prices and cut carbon dioxide emissions that result from burning jet fuel.
"We know the industry needs help with this," Gamrath said.
That doesn't mean Boeing wants to be in the biofuels business, he said.
Europe's debt crisis also gives Boeing a cause for concern. Boeing predicts European airlines will need 7,550 new airplanes in the next 20 years, a demand second only to Asia Pacific carriers. The region's economic woes could derail that.
Likewise, the U.S. economy faces another test later this year with the presidential election, Gamrath said. Although Boeing fared well during the last economic downturn, it might not do as well if another recession were to closely follow the one in 2008. Political consultants to Boeing believe the economy could be in trouble if members of Congress fail to work together following the November election.
"About six weeks after the election, Congress has to get its act together or there will be another recession," Gamrath said.
Meanwhile Tuesday, Boeing stock climbed 3.5 percent to $72.58. The company was raised to "outperform" from "market perform" by Sanford C. Bernstein analyst Douglas Harned. His 12-month share-price estimate is $92.
Bloomberg News contributed to this report.
Michelle Dunlop: 425-339-3454; mdunlop@heraldnet.com.
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