Boeing's Boffo Day

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If you're a Boeing (NYSE: BA) investor, yesterday's news was guaranteed to make you smile.

Make LUV-liners, not war planes
What news? Take your pick. In nonmilitary news, Boeing started the day off with a press release assailing negative commentary on the market for civilian airliners. Since about the first of this month, a slew of analysts have chimed in with downbeat forecasts for airplane deliveries (for example, this gem from Morningstar (Nasdaq: MORN).) Basically, the theory goes like this: High jet fuel prices have Delta (NYSE: DAL), Northwest (NYSE: NWA), United (Nasdaq: UAUA), and their kinfolk all laying off pilots and slashing capacity. Thus, it's less likely they'll be needing to buy as many planes as previously expected.

Logical? Yes. And to an extent, Boeing agrees with the assessment. Yet Boeing Marketing VP Randy Tinseth argues: "Our industry, which is based on the need to transport passengers and freight via our global aviation system, is extremely resilient." According to Tinseth, while the world won't necessarily need 36,400 airplanes over the next 20 years (as Boeing previously thought), it will need to buy about 35,800.

Boeing bases its reasoning on the same fact that has its detractors so pessimistic. Whereas critics see higher oil prices forcing airlines to mothball planes, Boeing believes people still need to get from Point A to Point B. In Boeing's view, airlines will less likely stop buying planes, period, and more likely trade in gas-guzzlers for new, more fuel-efficient craft (like the new 787 Dreamliner.)

Result: Boeing puts the 20-year demand for:

• Regional jets such as Russia's new Superjet or Embraer's (NYSE: ERJ) 190 at about 2,510 units.
• 787-like twin-aisle planes at about 6,750 units.
• Cheaper, single-aisle aircraft such as the 737 or "Boeing Y1" at 19,160 units.
• Jumbo jets such as the 747 at under 1,000.

Working its calculator, Boeing thinks that worldwide demand for aircraft will make for a $3.2 trillion market over the next couple of decades.

Back in the fight
The second bit of good news takes a more bellicose bent: Defense Secretary Robert Gates announced yesterday that he is reopening the competition to build the Air Force's new KC-X Tanker. Previously awarded to Northrop Grumman (NYSE: NOC), both Boeing and Northrop must now rebid for the $35 billion contract.

Now, I'm neither an aeronautical engineer nor a test pilot, so I cannot say with conviction whether Boeing's KC-767AT or Northrop's KC-30 is the better plane. I'm also not a meteorologist -- but I can still tell which way the political winds are blowing, and everything I'm hearing these days points in just one direction: Unless Northrop fields a plane that objectively thrashes the KC-767AT on both price and capabilities, Boeing's going to win this time around.

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