The airline industry is booming, and plane makers are seeing some nice tailwinds from increasing demand. In this Industry Focus: Energy clip, host Sarah Priestley and Motley Fool contributor Adam Levine-Weinberg go through Boeing's (BA 1.98%) most recent year in deliveries. Tune in to find out how the company did with their different models of planes, which models are becoming more popular and which are seeing shrinking growth, what's driving the growth in the 737 segment especially, and more.
A full transcript follows the video.
This video was recorded on Feb. 8, 2018.
Adam Levine-Weinberg: Let's talk about Boeing first. Boeing delivered 763 commercial jets last year. That was up from 748 in 2016. That's about a 2% increase. The 737 family drove more than two-thirds of the volume last year with 529 deliveries. And that's been a key theme recently. The 737 and the competing Airbus A320 family are very versatile jets; they're ideal for routes that are less than about 3,000 miles, and they're very cheap to operate. They're much cheaper to acquire than larger jets that can fly farther. So that's where you're seeing a lot of these budget carriers expanding, this is really their niche. So, this part of the market has seen by far the most growth. Another factor that's enabling that is, as you're getting new planes with new technology, both the 737 and the A320 have new generations that the two manufacturers are switching to. That gives them even more range so that they can expand to destinations that weren't previously possible.
Looking at the rest of Boeing's operation, the company delivered 14 of its 747 jumbo jets, 10 767s, which is an older model of twin-aisle airplane, and then 74 777s and 136 787 Dreamliners. So, the 737 family, as I mentioned, was by far the biggest volume driver. It also accounted for more than 100% of Boeing's growth last year. For the 777, which has historically been one of Boeing's most profitable airplanes -- it can fly up to 8,000 miles holding about 300 passengers -- it saw a 25% volume decline last year. There's been a bit of a slowdown in the market for these larger aircraft. And on top of that, Boeing is coming out with a new version of the 777. That's definitely caused some airlines to pause and wait to decide whether they want the older model or wait for the newer, more fuel-efficient version.
Sarah Priestley: So, we could start to see some pent-up demand being exhibited in 2018 and 2019 for these?
Levine-Weinberg: Yeah, Boeing expects there to be a big uptick in orders and deliveries for the larger planes starting around 2020, both because of the new technology that's coming online, and also just based on the timing of when airlines are going to need to replace some of their older aircraft.
Priestley: Absolutely. And as you mentioned, a lot of the 737 demand is being driven by low-cost carriers. We're seeing that transforming the industry. People's want for cheaper flights. More affordable travel is really a boon, and it's creating so much demand.
Levine-Weinberg: Yeah. The combination of the rise of the middle class in a lot of these emerging markets, and then, the rise of these low-cost carriers that can offer tickets far cheaper than what was previously available has created a boom where you're seeing economies growing 5-7% and air travel growing twice that fast. So, it's really creating quite a bit of new demand for aircraft.
