Economic weakness and softening growth in China have some speculating that the commercial aerospace cycle is on the verge of over-producing and swamping the airline industry with overcapacity.
Sterne Agee analyst Peter Arment disagrees.
For one, growth of the global fleet, when measured by net deliveries, is at a historical average, he said. And Boeing’s order deferrals are essentially at trough levels.
Boeing and Airbus are raising production rates as airlines replace aging fleets, satisfy growth in emerging regions and add more fuel-efficient aircraft to existing fleets.
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Boeing has 3,998 aircraft in its backlog and is sold out essentially through 2016. It’s sold some 737Max and 787 jets for delivery in 2020.
“Assuming global GDP continues to grind along and air traffic remains healthy, the strong need for airline fleet recapitalization coupled with a desire to have a more fuel efficient fleet should keep excess capacity growth measured and new deliveries should be able to be absorbed given the historical averages,” Arment wrote in an analyst report.