Boeing’s (BA) stock outlook is bleak, here is why.
The aircraft manufacturer Boeing expects a significantly lower demand for new commercial aircraft in the next ten years due to the pandemic. Demand will only recover in ten years from now, wrote the US company in its market outlook published on Tuesday. Global passenger traffic is on the up again after the slump as a result of the corona pandemic. However, a full recovery will take years.
Boeing now expects around 18,350 new passenger and cargo jets to be delivered between 2020 and 2029. That is eleven percent less than predicted in the previous market forecast from June 2019.
The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support, & 135 Billion Dollars for Paycheck Protection Program for Small Business. Both of these will be fully paid for with unused funds from the Cares Act. Have this money. I will sign now!— Donald J. Trump (@realDonaldTrump) October 7, 2020
But just as Boeing (BA) shares nosedived on Tuesday it seems as if President Trump is coming to the rescue, to save the industry. But have in mind, even if he signs the aforementioned $25B airline bill, this will only cover the salaries for airline employees. So, green numbers during after-hours on Tuesday are not sustainable in the long run. Money will not cover any airplane orders.
BA stock facing bigger headwinds
The company expects 43,110 passenger and cargo aircraft to be required in the 20 years up to 2039. A year ago, Boeing had forecast the delivery of 44,040 aircraft by 2038. Boeing sees a significantly lower demand than recently for large jets for long-haul traffic in particular.
“Commercial aviation is facing historic challenges this year,” said Darren Hulst, Boeing’s marketing manager. “It should take about three years to get back to 2019 levels.” It will take five or more years for the aviation industry to return to its long-term growth trend.
In the short and medium term this will reduce the demand for new aircraft and related services. In the next ten years in particular, many airlines are likely to replace older aircraft with new jets instead of expanding their fleets.
But there is some good news for Boeing stock
Nevertheless, Boeing expects growth to continue in the longer term. Passenger traffic is likely to increase by an annual average of four percent by 2039, it said. The aircraft fleet used worldwide is expected to grow from currently 25,900 to 48,400 aircraft during this period.
Traders also expect that BA stock price will recover sooner than later. At this point, it’s just unsubstantiated day dreaming.