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Survey: For An Aggressive Boeing, A Healthy Aircraft Aftermarket Is Good News

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Survey: For An Aggressive Boeing, A Healthy Aircraft Aftermarket Is Good News

The outlook for aircraft aftermarket growth is healthy, though it may be slightly below investor expectations, according to a Jefferies survey.

Jefferies Forecast Lands At Low End 

The push by Boeing Co (NYSE: BA) to increase its share of the aftermarket industry — at the expense of suppliers — is going well for the giant American plane maker, if not so well for the suppliers, respondents in the industry told Jefferies. 

Boeing has focused on increasing its share of the market for aftermarket maintenance, repair and upgrading of aircraft, taking some of that work away from its suppliers. And Boeing has also been trying to squeeze those companies for lower parts prices, Jefferies said.

Jefferies’ Aerospace Aftermarket survey leads the firm to expect aftermarket volumes in the industry to grow by 5 percent, at the bottom end of the 5-7 percent expected by investors, analyst Sheila Kahyaoglu said in a Tuesday note. That compares to 5-percent aftermarket growth last year.

Some of the reasons cited for lower volume in aircraft servicing include higher reliability and a relatively young fleet, much of which remains under warranty, the Jefferies report said. 

About 80 percent of respondents said they expect aftermarket prices to rise this year. 

Shifting Aftermarket Landscape 

Several of the survey respondents weighed in on Boeing’s impact on the repair and maintenance market, with the consensus being that the company’s push to take more of the market is having a noticeable impact on supply companies that typically have performed much of the lucrative aftermarket work on planes.

Boeing, which bought aircraft parts distributor KLX in an effort to boost its aftermarket work, now has about 35 percent of the market, Kahyaoglu said.

“This has been great for Boeing, terrible for suppliers to Boeing,” one respondent said, according to the Jefferies report.

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Latest Ratings for BA

DateFirmActionFromTo
Mar 2019ArgusDowngradesBuyHold
Mar 2019ArgusMaintainsBuyBuy
Feb 2019Morgan StanleyMaintainsOverweightOverweight

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Posted-In: Jefferies Sheila KahyaogluAnalyst Color Travel Analyst Ratings General Best of Benzinga

 

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