Earlier this week Louis Chenevert, CEO of United Technologies (UTX), was interviewed at the Paris Air Show. UTX is the manufacturer of the Pratt and Whitney airplane engines as well as the Sikorsky Helicopter. Chenevert was very bullish on the airline industry for the next one to two decades! When pressed on the reasons for his long-term optimism, he spoke about the significant improvement in aircraft engine fuel efficiency, improving 15% in the current upgrade cycle and over 30%+ versus 15 years ago. In addition, new plane engines have a 50% reduction in noise versus the fleet they are replacing. However, to me, the most striking statistic was his comment about global urbanization. Chenevert indicated the global urbanization is occurring at a pace of 30 million people per year. No wonder Chenevert is so optimist about air travel! This type of mass movement of people bodes well for a multitude of industries and certainly questions the validity of serious growth issues in developing markets. While some countries are urbanizing faster than others, 30 million people moving from the country to the city creates significant opportunities for American companies doing business in emerging markets (as well as companies based in emerging markets) for many years to come.
As always we welcome your comments and questions.
Denise M. Farkas, CFA