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Boeing Projects Jet Market Value of $350B in Latin America

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Defense and aerospace giant Boeing Co.BA released its current market outlook for Latin America. The company has given its projection for one of the highest growth rates in the region's commercial aviation market over the next 20 years. The company expects demand for over 3,050 new airplanes from the area's airlines worth $350 billion.

In Jun 2015, Boeing released its market outlook for new commercial airplanes in the next 20 years.

What is the New Projection?

Of the said 3,050 airplanes, 83% will comprise single-aisle jets like Boeing's 737 and Airbus Group SE's EADSY A320, driven by intense regional traffic growth. Also, the wide-body fleet will need 340 new airplanes as regional carriers continue to compete for routes that are presently dominated by foreign operators.

What is Driving Demand in Latin America?

Since 2005, the average airplane age in the region was reduced from over 15 years to below 10 years. This ensures a younger-than-average fleet in Latin America and the Caribbean. Moreover, Latin America has been witnessing steady replacement trends since the mid-2000s. This trend will likely lead to the replacement of approximately 60% of the current fleet in the next two decades.

Latin American passenger traffic is expected to grow 6% each year, compared with the world average of 4%. In order to accommodate this surge, the company believes that the region's fleet would need to more than double in the upcoming years.

What is the Global Projection?

Overall, Boeing anticipates the commercial fleet to double over the next two decades to 43,560 airplanes, fueled by sustained 4.9% annual growth in commercial passenger traffic. About 40% of the total commercial demand will likely come from Asian markets, 40% from Europe and North America, and the balance from the rest of the world. (Read more: Boeing Ups Jetliner Market Outlook to $5.6 Trillion by 2034 )

Boeing's Performance in the First Nine Months of 2015

The U.S. aerospace giant reported strong delivery numbers for the first nine months of 2015 on the back of continued growth of its 787 Dreamliner and Next Generation 737 single-aisle jetliners, beating its archrival, Airbus Group. Total commercial airplane deliveries were 580 during this period. Its 787 Dreamliner, despite setbacks and technical snags, remains a popular choice for major airlines, with 101 deliveries in the first nine months. The company's 737 jet deliveries were 375. Boeing has plans to boost the production rate to 12 per month in 2016 and 14 per month by the end of the decade.

Boeing is the largest aircraft manufacturer in the world in terms of revenue, orders and deliveries. Its revenue exposure is spread across more than 90 countries around the globe. Demand for Boeing's commercial airplanes is on the rise due to a steady improvement in passenger and freight traffic on the back of a recovering global economy. Boeing's commercial revenues increased 10% year over year in the third quarter of 2015 on as many as 199 commercial deliveries.

Zacks Rank

Boeing currently has a Zacks Rank #2 (Buy). A couple of other favorably placed stocks in the aerospace and defense sector are Huntington Ingalls Industries, Inc. HII and General Dynamics Corporation GD . Both companies carry the same rank as Boeing.

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BOEING CO (BA): Free Stock Analysis Report

GENL DYNAMICS (GD): Free Stock Analysis Report

HUNTINGTON INGL (HII): Free Stock Analysis Report

AIRBUS GROUP NV (EADSY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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