Boeing Faces a Future Without Fighter Jets, Defense Market Dwindling

Defense budget priorities may be nudging The Boeing Company BA out of the jet fighter business. Will the current trend, which is favoring rivals such as Lockheed Martin Corporation LMT, impact investors of the aerospace giant all that much?

Boeing behind the times?
Not really.

It's easy to see that Lockheed, which derives a significant portion of its revenue from military programs, would be impacted if things weren't going its way in the defense procurement industry. However, Boeing's bread is buttered by its prescence in the commercial aircraft business, which now accounts for two-thirds of the company's sales. Revenue from all of its military aircraft programs is just 16% of the corporate total and the portion has been declining. {Ref: http://idc.api.edgar-online.com/efx_dll/edgarpro.dll?FetchFilingConvPDF1?SessionID=PKEy6Md3tb8sRfS&ID=10106331}

A potential $5.2 trillion (yes, with a T) market in new passenger jets over the next 19 years will greatly impact future returns for shareholders. {Ref: http://www.boeing.com/boeing/commercial/cmo/}Boeing currently has a backlog of nearly 900 orders for its state-of-the-art  787 Dreamliner [Ref: http://en.wikipedia.org/wiki/List_of_Boeing_787_orders_and_deliveries}and has two major programs in development to address the expected growth in airline travel. The 737 Max, the upgraded version of the world's most popular aircraft with over 8,000 in service {Ref: http://en.wikipedia.org/wiki/Boeing_737}and the next generation of the "triple 7", a top seller in the long-range, wide-body category, should be ready to fly over the next few years.

LIghtning up the skies
The conventional version of Lockheed's F-35 should be in serivce in the U.S. Air Force by this time next year. The company, and its investors, are gearing up for that milestone along with the projected debuts of the Marine Corps (the "B") and Navy (the "C") versions of the 5th generation fighter, dubbed the Lightning II, soon afterwards.

The F-35B and F-35C will eventually crowd out two of Boeing's aircraft presently used by the military: the Marine Corps AV-8B Harrier II and the Navy F/A-18 Super Hornet, both of which it inherited after the acquistion of McDonnell-Douglas. 

Final thoughts
While it looks like Lockheed Martin will dominate the military fighter jet business for the forseeable future, things at Boeing, which is not expected to be a big player in that market, look ok thanks to the expected growth in commercial airline travel over the next two decades. Don't cry for either of the aerospace giants.