Monday, November 16, 2009

Boeing, Airbus see blue skies in 2010

By Money Matters Editors

Finally, some really good economic news. Airbus (EADS) and Boeing (BA) are both confirming that airlines have stopped pushing-back, or deferring deliveries of commercial airlines, Bloomberg News reported Sunday.

The significance for investors? When airlines end deferrals that means they’re confident about an upturn in air travel – something that usually heralds the start of an economic rebound.

Randy Tinseth, Boeing’s (BA) head of marketing for commercial planes, said as much.

“Next year will be a year of recovery, and in 2011 airlines will return to profitability,” Tinseth told Bloomberg News. “The last air show in 2007 was absolutely a year about orders, and this year is more about working with our customers.”

Now the bad news, at least on the U.S. side: Boeing may not be ready for the aviation rebound. The next-generation 787 Dreamliner has suffered repeated delays – the most recent of which concerns modification work to fix a design flaw. Boeing has promised a first test flight of the 787 by the end of calendar 2009. Boeing’s stock has taken a dip with nearly every delay: if the 787 does not perform well in flight tests, starting with a hoped-for first flight test in December – the stock will take another swoon, as institutional investors' patience finally ends regarding the new, but controversial composite-material 787.

Moreover, a 787 failure will not simply be a loss for Boeing – the failure would ripple through the U.S. economy, due to the many sectors that feed parts to the U.S. commercial aviation industry. The U.S.'s trade position also would be hurt: commercial airplanes are a major, value-added U.S. export. Hence, the hope is the 787 can make its first test flight in December, and is able to successfully complet its trial/test period to get the new plane to airlines around the world, when they need them most: at a time when passenger air travel is turning up. If it occurs, commercial aviation will serve as one growth engine for the U.S. economy in the years ahead, a welcome sight.

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