Boeing’s strategy for the new market

Boeing anticipates Asia-Pacific demand

Boeing’s strategy for the new market

Boeing (BA) forecasts that 48% of global traffic in the future will come from the Asia-Pacific region. This could lead to the demand for about 9,540 narrow-body and 3,570 wide-body planes in the next 20 years. The company predicts that the majority of the requirement would be for single-aisle jets, so BA’s 737 and 737 MAX families would act as the company’s trump cards.

A larger number of low-cost carriers (or LCCs) will come into play to cater to this rising demand. Boeing claims that its reengineered 737 MAX—scheduled to enter service in 2017—is 14% more fuel-efficient than competing jets. This would enable airlines to offer lower fares to passengers.

In the wide-body segment, Boeing’s strategy relies on its 787 Dreamliner, 777, and 777X aircraft. As of August 2014, the company had received orders for 260 aircraft from Chinese airlines compared to 230 in 2013. Singapore Airlines has placed orders for thirty 787-10s, and Cathay Pacific has ordered twenty-one 777-9X models. Boeing also received a $4.4-billion order for forty-two 737 MAX jets from the low-fare operator SpiceJet.

Airbus strengthens its presence

Boeing’s rival Airbus (EADSY) has also dived into this region with its A320, A320neo, A350 XWB, and A330 families. Airbus received orders for seventy-two A320s worth $7.2 billion from India’s LCC GoAir and a request for fifty A330neos from AirAsia. To cement its dominance further and offer seamless service, Airbus plans to add more partners in the region.

Over the coming years, expect fierce competition and steep discounts from both Boeing and Airbus in their efforts to attract customers from this lucrative market. While growth in new markets will benefit the Vanguard Industrials EFT (VIS), it will also help Boeing’s suppliers like Ball Corporation (BLL) and Kaman Corporation (KAMN).

The next article in this series will look at Boeing’s future prospects.