Boeing In Flux: How Its Navigating Industry Crosswinds

Boeing In Flux: How Its Navigating Industry Crosswinds

With airlines feeling the heat from a prolonged global economic weakness and rising geopolitical concerns, Boeing has also had a tough time filling its order books lately. The aerospace giant has only managed to get 335 commercial orders so for this year, down from 470 orders it had in the comparable period in 2015.

As of August 15, Boeing is among the most heavily shorted companies in the Dow Jones Industrial Average with just over 5% of its float being shorted, as investors show concerns over the company’s recent performance. In the past 12 months, the stock has lost nearly 9% in value, underperforming the Dow Jones US Aerospace & Defense Index, which grew 7.2% during the same period.

Low oil prices have helped airlines extend the use of ageing aircraft. This has eased the urgency to buy more fuel efficient planes, which is making it difficult for manufacturers to sell newer aircraft.

Additionally, demand for wide-body aircraft has been declining, as narrow-body jets become more attractive with added capacity and range. Smaller planes operating on routes also allow for higher frequency of flights. Boeing predicts that greater adoption of the low-cost carrier model­— especially in emerging markets—has driven this shift in demand. Although Boeing posted stronger-than-expected revenue of $24.75 billion in the second quarter, the aerospace giant recorded a net loss of $234 million.

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