All but one analyst see no bubble looming for jets

LYNNWOOD — Is the commercial airplane industry’s historically large order backlog legitimate or a bubble waiting to burst?

That question kept coming up on the opening day here of Washington’s largest annual aerospace conference. Industry insiders — from analysts to airline executives to suppliers to airplane makers — responded all but unanimously: There’s probably not a bubble, but there could be.

Economic bubbles are prone to burst, sometimes forcing violent market realignments that can consume companies, swallow individuals’ investments and drive up unemployment.

The huge order backlog — most of which is for jetliners made by the Boeing Co. and Airbus — is unusual enough to worry some in the aerospace industry. Their concern is that the airlines that placed the airplane orders could cancel or delay them, which would send a ripple through the industry.

“The foundation for everybody’s health in this industry is the airlines,” said David Fitzpatrick, an aerospace analyst with AlixPartners, based in San Francisco, during a panel at the Pacific Northwest Aerospace Alliance’s annual conference.

Fitzpatrick is not worried about a bubble, though.

He pointed to improving global economic conditions, airlines reducing the number of empty seats on planes and the need to replace aging aircraft as some of the reasons that demand for new planes isn’t going to burst.

“You should invest in this industry. There’s growth here,” he said.

There might be some “irrational exuberance” in some of the orders, but “have faith in the future — no bubble,” Fitzpatrick said.

Forget faith, there’s a bubble coming, said David Strauss, an analyst with UBS.

Strauss was the only speaker to take such a dim view of the industry’s next few years.

Air traffic isn’t growing fast enough, and airlines are keeping older planes in service too long to support the supply of new airliners, Strauss said.

Analysis by UBS indicates the oversupply of commercial airplanes will be big enough to start driving down production rates by 2016.

If UBS is right, that means there’s a bubble and it will burst — or at least start deflating — in a couple years.

Boeing doesn’t appear concerned. On Tuesday, the company announced that it is increasing the 737 production rate to 42 planes a month at the Renton plant.

The Chicago-based company will likely increase production further in coming years, according to Boeing.

Airbus will likely match Boeing’s production rate as the two fight each other and new entrants in the single-aisle jetliner market, said Scott Hamilton, an aerospace analyst with Issaquah-based Leeham Co.

The current order backlog for narrow- and wide-body jets is so big that even “if you cancel 10 percent, what does it really matter?” Hamilton said.

The PNAA conference continues through Thursday at the Lynnwood Convention Center.

Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

The livery on a Boeing plane. (Christopher Pike / Bloomberg)
Former Lockheed Martin CFO joins Boeing as top financial officer

Boeing’s Chief Financial Officer is being replaced by a former CFO at… Continue reading

Izaac Escalante-Alvarez unpacks a new milling machine at the new Boeing machinists union’s apprentice training center on Friday, June 6, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
Boeing Machinists union training center opens in Everett

The new center aims to give workers an inside track at Boeing jobs.

Some SnoCo stores see shortages after cyberattack on grocery supplier

Some stores, such as Whole Foods and US Foods CHEF’STORE, informed customers that some items may be temporarily unavailable.

People take photos and videos as the first Frontier Arlines flight arrives at Paine Field Airport under a water cannon salute on Monday, June 2, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
Water cannons salute Frontier on its first day at Paine Field

Frontier Airlines joins Alaska Airlines in offering service Snohomish County passengers.

Amit B. Singh, president of Edmonds Community College. 201008
Edmonds College and schools continue diversity programs

Educational diversity programs are alive and well in Snohomish County.

A standard jet fuel, left, burns with extensive smoke output while a 50 percent SAF drop-in jet fuel, right, puts off less smoke during a demonstration of the difference in fuel emissions on Tuesday, March 28, 2023 in Everett, Washington. (Olivia Vanni / The Herald)
Sustainable aviation fuel center gets funding boost

A planned research and development center focused on sustainable aviation… Continue reading

Helion's 6th fusion prototype, Trenta, on display on Tuesday, July 9, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
Helion celebrates smoother path to fusion energy site approval

Helion CEO applauds legislation signed by Gov. Bob Ferguson expected to streamline site selection process.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.