PEST Analysis of Boeing

Political factor

There are policies and regulatory decisions made by the governments that can have major impacts on the demand of their civil transport aircraft.

The US. Government and the Federal Aviation Administration (FAA) are very influential as Boeing is one of the largest air transport companies that they are highly focusing on. Also the US and European governments’ regulations could be the main driving force for the purchase of new aircrafts and engines in the future.

The deregulation of the European airlines, which were initiated in the early 1990’s hold the promise regarding their expanded market prospects for a smaller regional jets.

Trade in a larger commercial jetliners have been virtually tariff-free since 1979 under the General Agreement on Tariffs and Trade (GATT) (1)

There is a high level of political intervention, as a result has a major impact on the sales of the aircraft. Therefore, this will have an effect on the buyer’s decision. For example, China, the largest market for Boeing has gained political leverage in the US.

Due to the US and the European transatlantic agreement provided a major concession to both US and EU airlines. This agreement came to effect in March 2008, which covers 27 EU member states and US. This allows many airlines to have direct flights from many new airports. This agreement therefore generates more passengers, which leads to greater sales for Boeing. (2)

Economic Factor

Aircrafts operating business rely heavily on subsidies. Recently, Boeing and Airbus are on the debate of unfair subsidies between one another.

The economic recession and financial crisis have caused people to reduce their spending especially on travel. This reduction in passenger demand has led to cancellation of aircrafts orders.

However, in some of the fast growing economies countries such as, China and India. There is an increase in spending on air travel, which caused the increase in demand for aircrafts in those countries.

There are other effects, such as; the fluctuation in the fuel prices, the congestion and other environmental restrictions, as well as the prospect of higher security and insurance costs to reflect the risk of terrorism.

The global tourism industry trend also has the impact on the sales of the aircrafts.

Social Factor

In general, individuals tend to be taking more vacations especially for festive seasons such as, Christmas and Easter, thus causing the airlines to increase the supply of their aircrafts to fit the demand.

The low cost airlines influence people to travel more and thus increase the demand for the aircrafts.

Technological Factor

Usage more carbon composites in the manufacture of Boeing aircrafts will make the aircraft more fuel-efficient. Greater fuel efficiency will enable the aircraft to fly in a longer distances without refueling. This new technology has led to more orders for Boeing.

The supersonic transport also an opportunity because an entirely whole new segment of the market will form. Commercial carriers will buy many of these supersonic aircrafts in order to satisfy the consumer’s need to reach destinations quickly and on time.

Hi-tech advances will also help the companies to use up the resources more efficiently, i.e. using robots in the manufacturing process.

Environmental Factor

Although, there are no binding regulations on aircraft emissions. Many organizations have set voluntary targets to reduce the emissions. International Air travel Authority (IATA) has expected the improvement in fuel efficiency in aircrafts emission. Boeing has reduced energy consumption by 0.3 percent in 2009 and has reduced energy consumption on a revenue-adjusted basis by 32 percent since 2002. a 15% reduction in carbon emissions with every new commercial aircraft (Boeing, 2010). Demand for fuel-efficient aircrafts and environmental concern are driving Boeing to improve fuel efficiency and to use environmentally progressive materials.

Boeing has the best performing industrial company in 2009 for Carbon Disclosure Project, which ranks corporations for transparency around reporting climate-change risks and actions to improve environmental performance.

The EU commission, the European Parliament and the European Council have decided to include the aviation sector in European Emission Trading Scheme (EU-ETS). This scheme has set limits for airline emission. This scheme will thus force Boeing to produce more fuel-efficient aircrafts, to limit the emission. This will lead to additional costs for Boeing

Legal Factor

WTO has support Boeing’s complaint against Airbus regarding the illegal subsidies. This ruling could help Boeing to regain their position in commercial aircraft (4)

The new US-EU transatlantic market has provided more flexibility to both US and EU airlines. This has led to passengers being able to fly more cheaply, therefore they could lead to an increase in the demand for the aircrafts orders for Boeing .

Reference and Bibliography

(1) International Trade History : GATT and the WTO, Encyclopædia Britannica available online at

http://www.britannica.com/EBchecked/topic/228333/General-Agreement-on-Tariffs-and-Trade

Accessed 26 November 2010

(2) A Report by the European Commission and The United States Department of Transportation, Transatlantic Airline Alliances : Competitive Issue and Regulatory Approaches , November 2010

(3) Boeing Environment Report , Boeing main website

http://www.boeing.com/aboutus/environment/environment_report_10/5_conservation_pg_1.html

Accessed 26 November 2010

(4) Stearns. J, Freedman. J. M. and Rothman A., September 2010, WTO Rules Boeing Got illegal U.S. Government Subsidies, EU and France say.