The outlook for the aviation industry has never been so bullish, with companies thriving on the growing travel needs of middle-class people and business passengers. The demand for commercial aircraft is estimated to double in the next few years, and the current order books indicate the sector is largely unaffected by the trade tensions.
Demand is so high that industry-leading planemaker Boeing (BA) is struggling to meet its delivery targets. Though the company has gone to the extent of calling back retired employees to manage the capacity expansion at the 737 factory, the measures still leave a lot to be desired since the main cause of the delay is the inadequate supply of components by vendors.
If persisted, the supply chain constraints and the resultant drag on Boeing’s 737-program could have a long-term impact on the business, which depends a lot on the advanced jet family. According to experts, the company’s third-quarter results could be hit by the delays. Meanwhile, the need for scaling up production further is evident from the sharp increase in deliveries recorded in August – up 66% sequentially to 48 units.
The supply chain constraints and the resultant drag on Boeing’s 737-program could have a long-term impact on the business
Total deliveries, including the other popular aircraft types, rose to 64 units in August from 39 a month earlier. Meanwhile, new orders received for 737s was nearly double the number of the deliveries in August. According to reports, the inability of fuselage supplier Spirit AeroSystems and a GE-led joint venture that makes engines to honour their supply commitments resulted in unfinished Boeing 737s piling up in the Washington factory.
China, which has been witnessing an aviation boom, continues to lead the market with estimated demand for aircraft worth about $1.2 trillion in the next 20 years. At the current growth rate, the Asian country is expected to account for nearly one-fifth of the global aviation market.
Of late, airline companies have developed a penchant for narrow bodied models like the 737 and A320, the popular jet family that belongs to the same class as that of 737 and manufactured by Boeing’s European rival Airbus.
Boeing shares climbed about 39% since the beginning of the year and stayed broadly steady over the past six months. After opening Tuesday’s regular session slightly lower, the stock gained more than 1% when trading progressed.