High oil prices boost airplane demand – Boeing CEO


The global airline industry so far is resilient to soaring fuel costs, and carriers are showing strong demand for newer, more fuel-efficient planes, the chief executive of Boeing Co said yesterday.

Speaking to reporters after the company’s annual shareholders meeting, Jim McNerney said airlines are coping well with their fuel burdens, which have increased sharply as the price of oil has rallied well north of US$100 per barrel this year.
“I think at the current levels it’s actually improving demand, in the sense that our newer products are so much more fuel efficient than the old ones that the equation is favorable to getting newer airplanes faster,” McNerney said.
“Now at some point there’s a tipping point. At some point the oil gets too high — I’m not sure where that is — and the overall economic situation is impacted, which slows down fundamental demand,” he said. “I don’t think we’re there yet. I think the world is coping with this.”

NYMEX crude CLc1 traded above US$113 per barrel yesterday.

Boeing, last week, said its first-quarter profit rose 13 percent, topping Wall Street expectations. The world’s largest aerospace and defense company, which competes with EADS, has a backlog of commercial airplane orders valued at US$263 billion.

Boeing splits its business almost evenly between commercial airplanes and defense products.

McNerney said the killing of Osama bin Laden yesterday likely would have little immediate impact on government spending for Boeing’s defense products and services.
“My sense of it is that it is not going to dramatically change what was going to happen anywhere. I mean the threat environment remains significant outside of our country. And I think defense spending is matched up to that right now.”

McNerney noted ongoing pressure on defense budgets around the world.
“I’m not sure the Osama Bin Laden thing will change that dramatically,” he said.