25 September 2008

I want what Boeing is smoking....

Randy Tinseth - normally a sane and rational guy - and one of Boeing's ace salesman if not THE guy - made a comment in Sydney yesterday that really needs a degree of scrutiny. He said that Boeing expects oil to stabilize at $70-$80 per barrel (in 2008 dollars) over the next 20 years adding that the company's forecasts have proven to be "quite accurate" this decade.

OK - that sounds very fluffy. However I really have to say I dont think so. In 2008 dollars - I think he is off at least 20 points. But there is an interesting corollary to his statement.

At this price the economics of older generation Stage 2+ jets stays pretty active. MD80s (according to one analyst's numbers) become price prohibitive at about $107 pb in 2008 dollars. (Actually 2007). So that means that MD80s and 737 classics (300/400/500) can be quite an attractive proposition if oil does keep to his numbers. The 20 year average however gives him a LOT of wiggle room.

So for a new "'plane" salesman to make this kind of statement makes me wonder if he was smoking something. Those nice parking spots in the US Southwest start to look very attractive as a place to get bargains.

It makes companies like Allegiant look really good.



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