Some Tailwinds for Boeing (BA)

Lawmakers say Pentagon will reopen tanker bid, award winner by the end of the year WASHINGTON (AP) -- The Pentagon will re-compete a $35 billion contract to build the Air Force's fleet of new refueling tankers and pick a new winner by the end of the year, lawmakers said Wednesday.

The Government Accountability Office last month detailed "significant errors" the Air Force made in the original award to Northrop and Airbus parent European Aeronautic Defence and Space Co. The GAO said Boeing might have won the contract had the service not made mistakes in evaluating the bids.

Sen. Richard Shelby, a Republican from Alabama, where the Northrop Grumman team would assemble its plane, said the Pentagon will conduct a limited rebid that looks only at seven issues where government auditors found problems in the initial process.

Shelby called it "the best of all options" that would address the "minor procedural flaws" the GAO cited.

The deal is the first of three contracts worth up to $100 billion to replace nearly 600 refueling tankers over the next 30 years.

Full Article: http://biz.yahoo.com/ap/080709/boeing_tanker_fight.html

Also to add, Boeing came out with a new POSITIVE outlook.

Boeing raises forecast for 20-year deliveries

10:58a ET July 9, 2008 (MarketWatch)

LONDON (MarketWatch) - Boeing Co. on Thursday raised its 20-year forecast for global commercial airline deliveries by 2.8% to 29,400, saying continued air travel growth and record-high fuel prices are boosting demand for new, more fuel efficient aircraft.

Boeing now expects 29,400 new jets worth $3.2 trillion to be delivered over the next two decades compared to 28,600 in its 2007 forecast.

The company said its forecast, which is updated every year, takes into account the short-term pressures on the industry from the deteriorating economic outlook, record-high oil prices and slowing traffic growth in some markets.

It assumes that the oil price will remain "high and volatile" in the near term before falling back to between $70 and $80 a barrel.

"We're facing a very dynamic situation today in the commercial aviation industry," said Boeing's head of marketing for commercial airplanes Randy Tinseth. "This forecast is rooted in today's realities, but also recognizes the nature of the long-term outlook."

Around 43% of the jets will be used to replace older aircraft, an increase from last year's forecast of 36%. The new aircraft will consist of 19,160 single aisles, 6,750 twin aisles, 2,510 regional jets and 980 larger aircraft of the Boeing 747 or Airbus A380 type.

Boeing expects the global fleet at the end of the 20-year period to consist of about 35,800 jets compared with a previous outlook of 36,400.

What stick out to me the post is the assumption that oil will return to between $70 to $80 a barrel. I do so a pullback in the price per barrel at some point but we may never see those prices again.

Currently, Americans use 25 barrels per person per year. China uses 2 and India 1. Even if we can double production in 10-20 years- WHICH IS MOST LIKELY IMPOSSIBLE- I can see China growing at least at a rate of 15%. That means demand, in just those countries, will double every 4-5 years. China and India make up about 40% of the world population, will put enormous pressure on the world.

But I digress, if oil stay at current levels, $140 per barrel, will this hurt Boeing? Will airlines take the definite short term pain of the cost of more fuel-efficient planes for possible future benefits?

One way I can see this occurring is extreme dilution for airline shareholders.