The airline giant’s market outlook had plenty of interesting things for investors to consider.
Boeing (BA 1.38%) has just released its market outlook for 2024-2043, which is full of data that can be used to help guide investors in the aviation sector. Here’s a look at a few of them and why they’re good news for you AAR (SPIRIT 0.51%), Hexcel (HXL 2.28%)and GE Aerospace (GE 3.12%).
Boeing’s business market outlook
For the sake of brevity, here are the key takeaways from Boeing’s commercial market perspective:
- Annual fleet growth of 3.2% as the world moves from a fleet of 26,750 aircraft in 2024 to 50,170 in 2043.
- Fleet growth includes 20,565 aircraft for replacement and 23,410 for growth, totaling 43,975 aircraft over the next 20 years.
- Passenger traffic is expected to grow at an annual rate of 4.7%.
- Widebody fleets will grow at an annual rate of 3.65% compared to 3.56% for narrowbody fleets, with cargo aircraft growing at 2.59% and, interestingly, regional aircraft fleets decrease at an annual rate of 1.64%.
- The services market will be worth $4.4 trillion in the next 20 years.
Image source: Getty Images.
AAR
This view noted that due to the difficulty of transporting new aircraft in recent years, the speed of the removal of aircraft runs at half the normal speed. For the same reasons, the age of the vessels has increased since 2019. For example, the average age of narrow vessels is 11.3 years compared to 10 years in 2019, and the average age of wide vessels it is 11.2 years compared to 9.5 years in 2019.
These numbers mean good news for airline service companies like AAR. Older fleets tend to offer more services, and given the continued strength in traffic growth, it’s fair to expect at least single-digit revenue growth from the carrier. of parts, maintenance and engineering, and integrated aviation solutions.
With long-term relationships with airlines such as United Airlines, Delta Air Linesand Air Canada With the opportunity to leverage its fixed cost base on network expansion while building scale, AAR’s potential for long-term profitable growth is significant.
Image source: Getty Images.
Hexcel
As a provider of advanced integrated equipment for the commercial aircraft market, Hexcel benefits from the expansion of overall inventory. and transition to new species. The aviation industry is now turning to stronger, lighter materials made by Hexcel, as they help improve performance and meet emissions targets. This is especially true for wide planes.
While the delay in deliveries to 2024 affected Hexcel’s near-term prospects, the forecast of 43,975 new aircraft over the next 20 years is very positive for Hexcel because it suggests a strong demand for equipment. which are combined.
For example, legacy Boeing 737 and Airbus A320 aircraft have 5% and 10% of combined asset penetration rates, respectively, compared to 15% each for the A320neo and 737 MAX. In addition, Boeing is planning a new aircraft in the middle of the next decade, and Hexcel believes that the next generation of thin aircraft could have a penetration of 60% of the composite material.
It all points to a very bright future for Hexcel.
Image source: Getty Images.
GE Aerospace
Leading aircraft engine company GE has partnered with Saffron, CFM International, supplies engines for the Airbus A320neo family and the Boeing 737 MAX. GE also supplies engines for Boeing 777X, Boeing 787, and Airbus A330 wide-body aircraft.
No matter how you look at it, more aircraft deliveries mean more orders for GE’s aircraft engines. In addition, the forecast that passenger traffic will grow at a rate of 4.7% means that GE engines will be used more, which leads to a much higher market revenue for the company.
In addition, the significant shift to smaller aircraft from small regional aircraft also plays to GE’s strength in the narrow market. More importantly, introducing a similar narrowbody engine model (currently the LEAP) should result in margin expansion as GE lowers unit engine costs over time. Additionally, the high growth rate of widebody aircraft, which tend to be more profitable than narrowbody aircraft, also bodes well for GE.
Stocks to buy?
Investors need to know that the commercial airline industry is moving for a long time, and the kind of growth that Boeing’s forecast calls for will not be enough. However, the forecast is good for AAR in the medium term, Hexcel in the long term, and GE in any time frame you wish to consider.
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