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US Aircraft Orders Plunge, Rockwell Collins (NYSE:COL) and Boeing (NYSE: BA) Not Worried


Friday, April 23rd, 2010

Responding to reports that orders for aircraft in the U.S. plunged in March, makers of aircraft like Rockwell Collins (NYSE:COL), Boeing (NYSE:BA) and European Aeronautic Defence & Space Co.(FR:EAD)(EADS.Y) said they weren't concerned, as the story of airlines orders is from emerging markets and not mature ones.

Aircraft orders and demand are primarily from the Asian and Middle Eastern markets at this time, and that's where investors or analysts need to look when wanting to see the health of aircraft builders.

Even so, it's not like it would have hurt if the U.S. demand had been higher, as all business is welcome business, so it's also an attempt to play down the loss in North American demand, while calling attention to where real growth in the industry lies.

"The strongest demand is for large aircraft from Asia and the Middle East," said Clay Jones, the chairman and chief executive of Rockwell Collins. "The vast bulk of orders are coming from outside the U.S."
 
In the North American market, expectations are there won't be an increase in demand until sometime in 2011, and that assumes the so-called economic recovery in America actually takes hold. That remains unclear with the unemployment still very high and continued uncertainty in the housing sector.

Competitors Boeing Co. and European Aeronautic Defence & Space Co. both said they are looking to increase production rates for single-aisle and wide-body aircraft in the latter part of 2010, and will maintain the rates on their other aircraft lines.

That seems to confirm they're confident demand will remain high from Asia and the Middle East, as they wouldn't think of raising rates if there was uncertainty concerning pricing being a factor which could slow down companies buying aircraft from them.

Even so, the fact that there was a drop of new aircraft orders of 67 percent over a year ago can't be taken lightly, and there are some conflicting data like the Commerce Department report which stated the overall value of orders has increased by about 47 percent in the first quarter.

What seems to be going on here is the aircraft manufacturing industry took a big hit with the 67 percent drop in new aircraft orders, and this response is damage control so their share prices are pummeled from investor worries.

It looks like there are good points on each side which say the numbers don't tell the whole story, while the reality is things are still going to be tight for some time, even with the new international orders.



Article by Gary B

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com



Tags: aircraft manufacturers , boeing , durable good orders , european aeronautic defence an , rockwell collins

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