Airbus, Boeing – November a Weak Month in Orders Race

by J. Kasper Oestergaard, European Correspondent.

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Airbus needs to deliver 16 A350-900 jets in December to reach the 2016 target of 50 jets – an impossible feat unless the company has a long line of almost-finished jets stacked up at the final assembly line. Photo Courtesy Airbus SAS

Boeing and Airbus delivered 64 and 61 commercial jets in November 2016, respectively, compared to 71 and 61 during the same month last year. As of November 30, 2016, Boeing is trailing last year’s delivery figures with 681 commercial jets delivered (709 in 2015), which is in line with company expectations. Airbus has delivered 577 jets to date and is 21 deliveries ahead of November of last year.

In 2015, Boeing delivered 762 aircraft, ahead of Airbus’ 635, and both companies beat their 2015 delivery targets of 750-755 and ~630 aircraft, respectively. In 2014 and 2013, Boeing delivered a total of 723 and 648 jets, respectively, compared to Airbus’ 629 and 626. In late July 2016, Airbus reaffirmed its target of delivering at least 650 commercial jets in 2016, an increase of 15, or 2.4 percent, from 635 last year. Boeing, in contrast, has announced that deliveries could drop by 22, or 2.9 percent, to 740 from last year’s record of 762 deliveries.

In November 2016, Boeing delivered 48 737s, two 767s, five 777s, and nine 787s. Boeing currently plans to raise its 737 production rate from 42 per month today to 47 and 52 in 2017 and 2018, respectively. In early 2016, Boeing’s CEO, Dennis Muilenburg, announced that demand supports a further increase to 57 737s per month in 2019. Airbus is slowly ramping up deliveries of its A350 XWB and this, combined with a higher A320 production rate of 46 per month (commenced Q2 2016), means that the company is narrowing the gap in the deliveries race. In November 2016, Airbus delivered 48 A320s, seven A330s, four A350s, and two A380s.

With four A350-900 deliveries in November, Airbus still has to deliver 16 of the new long-haul jets to meet its target of 50 for the year, which is now impossible unless the company has a considerable line-up of almost- finished jets stacked up at the final assembly line. A350 production has been reduced this year by issues and delays in the interiors supply chain. The company expects to deliver 80 A350s in 2017 and more than 100 A350s in 2018, when the production rate hits 10 per month.

In the orders race, both companies had a very quiet month. Boeing landed just 13 gross orders (minus 4 cancellations => net of 9). Boeing’s November orders included two 787-9 Dreamliners for an unidentified customer, four 737 MAX 8s for Poland’s Enter Air, and three 737-800s for an unidentified customer. Airbus had an equally weak order haul in November and landed 15 gross orders (zero cancellations), including an order from an unidentified customer for five A321ceos and three A320ceos. Also, UAE low-cost carrier Air Arabia placed an order for five A320ceos – see full list of orders in data table below. In 2015, Airbus booked a total of 1,036 net orders, while Boeing finished the year with 768 net new orders, or 268 fewer than Airbus. In both 2014 and 2013, Airbus won the orders race with 1,456 and 1,503 net new orders, respectively, ahead of Boeing with 1,432 and 1,355.

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Airbus’ order backlog as of November 30, 2016, stands at 6,664 jets (of which 5,460, or 82%, are A320 family narrowbodies), ahead of Boeing’s 5,580 (of which 4,280, or 77%, are 737 narrowbody jets). The number of Airbus aircraft to be built and delivered represents a >10-year backlog (10.5 years of production). In comparison, Boeing’s backlog would “only” last 7.3 years at the 2015 production level.

It is looking increasingly likely that the massive backlogs accumulated by both manufacturers in recent years have peaked, with both companies facing their lowest order haul since 2009. Airbus is currently 205 aircraft below its all-time order book high of 6,869 jets recorded in August 2016, while Boeing is off by 233 (5,813 in January 2016 vs. 5,580 at the end of November). Boeing has booked 466 net new orders to date this year and, to reach its 2016 target of 535 orders, the company needs a very strong order haul in December. The company’s original forecast for 2016 was for 740-745 orders. Earlier this year, Boeing opted to leave list prices unchanged. The last time this happened was in 2001 and 2009. The prices set in July 2015 therefore continue to serve as the basis for talks with customers.

It is now almost certain that backlogs will decline at both companies in 2016, as orders have not come in fast enough to keep pace with deliveries. This is mainly due to slower GDP growth and low oil prices. According to both Airbus and Boeing, the demand for passenger aircraft is tied to growth in worldwide revenue passenger miles (RPMs), which again is highly correlated with global GDP growth. The decline in orders should not be a major source of concern for jet makers, though. Backlogs are not far from their all-time highs and will provide stability and growth for years to come. The main focus for both companies continues to be managing cost and extensive, global supply chains. According to Boeing, about 65 percent of the cost of a jet is attributable to the supply chain. It is therefore no surprise that both Airbus and Boeing are putting pressure on their suppliers to cut costs.

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Commercial AirThe Forecast International Civil Aircraft service covers all facets of the fixed-wing commercial and private aviation industry. It includes more than 70 detailed reports, complete with production forecasts on individual civil aircraft families. Four Market Segment Analyses provide in-depth examination of the markets for Large Commercial Jet Transports, Regional Aircraft, Business Jets, and General Aviation/Utility Aircraft. Included in the reports are production forecasts, a Forecast Rationale detailing the basis for the forecast, the aircraft’s price range and technical specifications, a program history, and recent developments.Forecast FI LogoReferences:

http://www.boeing.com/commercial/#/orders-deliveries

http://www.airbus.com/company/market/orders-deliveries/