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Analyst warns Boeing must rely on smaller planes to survive next few years

An aerospace industry expert says Boeing will have to rely on its smaller planes to get through the next few years. (AP Photo/Ted S. Warren, File)

The 12-year boom in the aviation industry has come to the end, and Boeing could face a few tough years ahead. Those are the warnings from aerospace analysts Richard Aboulafia.

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The economic drivers that were pushing the industry over the last decade are gone, and there isn’t a huge market right now for what Boeing is offering, at least in the twin-aisle market. Aboulafia says the economics have changed, and Boeing is going to have to rely on its very popular smaller planes, such as the 737, to get through the next few years.

“Some of the real catalysts we’ve enjoyed for growth are going away,” he said. “But I really don’t see any downward pressure. The number one thing to remember is the spine of this thing is people flying and traffic growth numbers are still quite positive.”

It’s a glass-half-full situation. There will be growth, just not as much, and only in certain plane programs. But the days of wild expectations seem to be over.

There is one major issue that could push this into a bust cycle, and that is President Donald Trump.

“The only thing I’d really be concerned about is the potential for something bad happening as a result of the global trends reacting to globalization,” Aboulafia said. “Free trade is the very best friend this industry has and you start enacting trade barriers, border adjustment taxes, tariffs — whatever else — you’re playing with fire. That could easily precipitate some kind of downturn that I think we’re otherwise going to avoid.”

President Trump has suggest largest tariff’s on China, and that could easily tip China to choose Airbus over Boeing.

The supply chain is also a potential casualty of new White House trade policies.

“Sourcing decisions tend to be a lot sticker … this is an industry based on the life of program contracts — partnerships. You start enacting border adjustment taxes that just directly impacts pricing for all aircraft.”

And Aboulafia says with the world waiting to see how the U.S. is going to play in the global economy, Aboulafia says that could be enough to scare us into a bigger aviation downturn.

“We have a bunch of companies waiting and watching, unsure what direction things are taking,” Aboulafia said. “That’s a recipe for investment to decline. That alone could trigger a recession.”

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