Boeing Banks on China for Long-Term Aviation Growth

Boeing sees China staging a robust recovery from the Covid-19 pandemic and becoming the main driver in global aviation growth over the next two decades.
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Boeing  (BA) - Get Report sees China staging a robust economic recovery from the Covid-19 pandemic and becoming the main driver in aviation growth worldwide over the next two decades and leading to sales worth trillions of dollars.

Boeing, in a long-term forecast released Thursday, said that it sees China as the key driver of demand for airplanes over the next 20 years, with Chinese airlines likely to buy 8,600 new airplanes worth $1.4 trillion as economic growth drives demand for moving an expanding middle class as well as more goods through the skies.

Chicago-based Boeing said its outlook reflects an expected robust recovery for China from the Covid-19 pandemic, driven by strong economic growth amid ongoing urbanization and growth of the middle class as well as government investment in transport infrastructure, regional traffic flows and a flourishing domestic market.

“Despite the challenges imposed by the pandemic, China’s projected airplane and services market represents a nearly 7% increase over last year’s 20-year commercial market outlook forecast,” Boeing said, adding that roughly 25% of worldwide aviation growth over the past decade has come from China.

The forecast stands in stark contrast to Boeing's current financial standing, which has been slammed not only by the pandemic and steep drop-off in air travel but also from the global grounding of the company's 737 MAX jets. 

China was the first country to ground Boeing’s 737 MAX in March 2019 following deadly crashes in Indonesia and Ethiopia, kicking off a domino effect as regulators in other nations soon followed suit.

Boeing’s long wait to get the MAX re-certified and back in the skies could be nearing an end, with the U.S. aviation regulator potentially approving its return to commercial service as soon as next week. 

Regulators in Europe have also signaled they’re close to giving the MAX clearance to fly, saying they’re satisfied with Boeing’s proposed changes to the jet. China still hasn’t given a clear timetable for its re-certification and return.

Longer term, Boeing said it expects annual passenger traffic growth of 5.5% in China over the next 20 years. Specifically, the company sees single-aisle jets, which include the 737 family, as the main growth driver, with more than 6,450 new orders forecast. Wide-body demand will account for 18% of China’s deliveries, down 4% from last year’s forecast due to the slower recovery in long-haul traffic, Boeing said.

Growth in aviation in China will also translate into $1.7 trillion of aviation services over the next 20 years, Boeing said. 

Shares of Boeing were down 0.8% at $180.07 in trading on Thursday.