Saturday, January 10, 2009

2007 is Looking increasingly looking like it Was a Bubble Year for the Aircraft Industry

Today's Wall Street Journal reports that Boeing is eliminating 4,500 jobs. Both Boeing and Airbus are trying to reduce costs. "The cuts will reduce the division's employees by 6.6% to 63,500 by the end of the year, level with employment at the start of 2008. The reduction will involve a mix of attrition and layoffs focused in the second quarter.

"Boeing and archrival Airbus have bulging order books after a three-year boom from 2005 to 2007, though Boeing announced this week that new contracts fell 53% in 2008."

New orders for the U.S. industry have fallen for nine straight months and the industry's backlog fell in November, only the third time in the last three years.

The huge surge in orders in 2007 in increasingly looking like a bubble.

All this is worrisome for the local Wichita economy with its heavy dependence on this industry. Bubbles have a painful way of correcting themselves.

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