Boeing Says Plunging Oil Prices Won’t Hurt Demand For Airplanes
The price of crude oil has dropped to its lowest level in about five years and has fallen about 40 percent this year. That’s great for people filling up their gas tanks, but perhaps not such good news for a company like Boeing that’s made fuel-efficiency of its new airplanes a big selling point.
Now the company is explaining why the drop in oil prices is not cause for concern.
Boeing recently sent a message to analysts explaining why the company doesn’t expect that decline to hurt demand for new airplanes. For example, the company says it generated more than 3,000 orders when oil averaged $60 a barrel between 2005 and 2007. That’s about where oil prices are now.
Analyst Scott Hamilton says demand for new models such as the Dreamliner and the 737MAX should stay strong.
"Airplanes get old and you’re going to have to replace them anyway, regardless of the fuel oil prices, so you’re going to go ahead and buy the latest technology," Hamilton said.
But Hamilton says the business case for buying classic models of the 777 and Airbus’ A330 becomes less compelling with lower oil prices. Boeing has said it expects demand for the 777 to remain healthy through the end of this decade, bridging the transition to the new model, the 777x.