Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

The Boeing Company (BA): ‘Air Traffic to Double Within 20 Years’

Page 1 of 2

With the increasingly tight global village, countries like China and the United States seem more like neighbors than ever before. Analysts of the airline industry have said globalization will increase air traffic significantly, and on June 11, The Boeing Company (NYSE:BA) reinforced that sentiment when it made a major statement, saying the number of commercial aircraft throughout the world will double in the next 20 years.

The Boeing Company (NYSE:BA)

What that means for airline companies

Many airline fleets are aging, so that means there is ample opportunity for those who manufacture planes to increase sales through new orders. Those older vessels are also not as fuel efficient, which also encourages airline operators to purchase more fuel-efficient models, particularly due to rising oil prices.

According to Randy Tinseth, The Boeing Company (NYSE:BA)’s vice president of marketing, cheap operational costs and efficiency are the major factors in providing quality airplanes. “The contribution of fuel to the cost of flying planes has doubled,” he told the Guardian. “As a result, we see customers looking foremost at efficiency — in fuel, but also in maintenance and labor, the second-highest cost contributors.”

The growing global middle class

The Boeing Company (NYSE:BA) said that many of the sales will be in the Asia-Pacific region. The area is the subject of a rapidly increasing middle class, and with the population of China alone reaching more than 1.3 billion, that’s a lot of people setting out on dream vacations or conducting business overseas.

The demand, The Boeing Company (NYSE:BA) says, will result in the order of more than 35,000 new aircraft, representing about $4.8 trillion (yes, trillion). Many of those new planes will replace the old, and bring to total number of planes to around 40,000 around the world. Boeing expects cargo and passenger traffic will increase by 5% each year.

Do the numbers support Boeing’s sales expansion theory?

With first-quarter results posting a decrease in sales of products over the previous year of over $300 million, the future at first glance doesn’t look to be here quite yet. But in taking a closer look, the company has nearly $2 billion in accounts receivables in 2012, compared to less than $1 billion the year before and only $320 million in 2009. Also, total cash from operations in 2012 was $7.5 billion compared to $5.6 billion in 2009.

Furthermore, the company increased inventories by about $3 billion from 2011 to 2012, showing the firm could be building up for large demand. The increase represents a 4% rise from the previous year. Putting that into context: 2010 and 2011’s increases were identical at 2.5%. This shows the company could be ramping up efforts to build inventory to meet future demand.

Other companies set to profit

Honeywell International Inc. (NYSE:HON) is also in a solid position to profit from an increase in aircraft sales. The company manufactures airplane controls, engines and other related equipment. The firm’s financial results have been mixed, with the company reporting an increase in earnings of 17% in the latest quarter. However, net sales and receivables were static compared to 2012’s first-quarter results. Inventories actually decreased by about 1% at Honeywell, so unlike The Boeing Company (NYSE:BA), the company doesn’t seem to be making plans for increasing sales.

Honeywell International Inc. (NYSE:HON) is more diversified than Boeing, however, and therefore represents a safer bet if you are looking to invest in a company closely tied with aerospace but not entirely consumed by the market. On June 11 the firm revealed a Wi-Fi-controlled thermostat better able to monitor energy consumption. The device is meant to be used by municipalities throughout the United States to ensure accurate energy readings.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!