Boeing Chairman and CEO Jim McNerney (Photo: Mandel Ngan/AFP/Getty Images)
In a sign of a robust commercial aviation industry and a confident corporate leadership, Boeing Chairman and CEO Jim McNerney announced Monday that his company was increasing its quarterly dividend by 25 percent to 91 cents per share.
He cited “the solid growth outlook for commercial aviation” as part of the basis for the higher dividend, which the company has increased by 88 percent over the past two years.
Meanwhile, market observers have been puzzling over whether the plunge in oil prices is a welcome stimulant to economic growth, or an early warning sign of weakening growth, especially in Pacific Rim and Asian economies.
McNerney assured investors in late October that declining oil prices wouldn’t lessen airlines’ demand for the more fuel-efficient planes that Boeing makes.
Oil prices would need to fall “a long way from where we are now” before “you begin to see even [an] incremental impact” on airlines’ demand for more fuel-efficient aircraft, he said.
But when McNerney said that, the Brent crude benchmark was at about $85 a barrel; today it is below $59 a barrel for the first time since the spring of 2009.
China has, of course, been one of Boeing’s best markets for years, and there was related aviation news from China Tuesday with the Financial Times reporting that the top economic planning agency has given its approval to a new $13 billion airport in Beijing.
But the FT portrayed this as “part of government efforts to boost flagging growth by accelerating construction of state-led infrastructure projects.”
The FT notes that Beijing’s existing airport was completed only six years ago. (Just for comparison: New York City’s LaGuardia Airport was built in 1939.)
“An oversupply of airports is different than an oversupply of planes,” explained Derek Scissors, a resident scholar at the American Enterprise Institute who specializes in Asian economic trends.
“China is plainly building too many airports (almost 100 more on the way) and many of them are too large. This is merely to boost short-term economic numbers, and will waste a great deal of money.”
But he added, “Since it’s state-controlled, top to bottom, it doesn’t qualify as a bubble. Just a bad idea.”
He also said, “The Chinese don’t get the same benefits from over-ordering planes and there are no reports of aircraft sitting idle, as there are with facilities. The main threat to Boeing is longer-term: the Chinese are trying, not yet successfully, to make their own aircraft.”
In the near term he added, “Boeing is at risk of overstating the vigor of the Chinese economy and thus the demand for its products.”