by J. Kasper Oestergaard, European Correspondent.
Airbus Delivers 111 Jets in Wild Year-End Rally, Logs 321 Net Orders
Boeing and Airbus delivered 67 and 111 commercial jets in December 2016, respectively, compared to 53 and 79 during the same month last year. For Airbus, this marks an unprecedented dash to the year-end finish line, having been held back by A320neo and A350 supply chain issues. For the full year of 2016, Boeing delivered 748 jets (762 in 2015), in line with company expectations, while Airbus surpassed its delivery target of 650-670 jets by handing over 688 jets during the year (635 in 2015). In 2015, Boeing delivered 762 aircraft, ahead of Airbus’ 635. In 2014 and 2013, Boeing delivered a total of 723 and 648 jets, respectively, compared to Airbus’ 629 and 626.
In December 2016, Boeing delivered 40 737s, one 747, one 767, 14 777s, and 11 787s. Boeing currently plans to raise its 737 production rate from 42 per month today to 47 and 52 during 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 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 now narrowing the gap in the deliveries race and could surpass Boeing in 2019. In December 2016, Airbus delivered 76 A320s, 13 A330s, 15 A350s, and 7 A380s, all unusually high monthly numbers for the company. Issues with the supply of A350 interiors and Pratt & Whitney PW1100G turbofan engines for the A320neo now appear to have been resolved.
With 15 A350-900 deliveries in December, Airbus almost reached its 2016 target of delivering 50 of the new long-haul jets, only off by one aircraft. As we suspected, the company had a considerable line-up of almost finished jets sitting at the final assembly line. A350 production was slowed down in 2016 by delays in the interiors/cabin equipment supply chain. The company expects to deliver 80 A350s in 2017 and more than 100 A350s in 2018, when the production rate will hit 10 per month.
In the orders race, both companies had a very strong month. Boeing landed 229 gross orders (minus 27 cancellations => net of 202). Boeing’s December orders included a major order for 100 737 MAX 8 narrowbody jets placed by India’s SpiceJet, a low-cost airline headquartered in Gurgaon. Also, GE Capital Aviation Services (GECAS) placed an order for 75 737 MAX 8s, while two undisclosed customers combined ordered another 81 737 MAX jets. During the month of December, customers ordered eight 787 Dreamliners, including four 787-8s for Uzbekistan Airways. Airbus had an even stronger order haul in December and landed 349 gross orders (minus 28 cancellations => net of 321), including the much-awaited Iran Air order, which includes six A320ceo, 32 A320neo, eight A321ceo, eight A330-200, 28 A330-900, and 16 A350-1000 aircraft, for a total of 98 jets (the announcement of the order cited a total of 100 jets; however, Airbus has only put 98 jets in its books). Also, an undisclosed customer placed an order for 80 A320neo and 10 A320ceo narrowbody jets, while GoAir – a low-cost carrier based in Mumbai, India – ordered 72 A320neos. Finally, an undisclosed customer ordered 42 A320ceo/neo jets, and Aviation Capital Group (ACG) ordered 25 A320neos.
Airbus’ order backlog as of December 31, 2016, stands at 6,874 jets (of which 5,645, or 82%, are A320 family narrowbodies), ahead of Boeing’s 5,715 (of which 4,452, or 78%, are 737 narrowbody jets). The number of Airbus aircraft to be built and delivered represents a 10-year backlog at the 2016 production level. In comparison, Boeing’s backlog would “only” last 7.6 years.
Prior to the December surge in orders, it looked highly likely that the massive backlogs accumulated by both manufacturers in recent years had peaked. However, with the impressive order haul last month, Airbus’ backlog is now higher than ever before, surpassing the old record set in August 2016 by five aircraft. Airbus landed 731 net new orders in 2016 – or a book-to-bill ratio of 1.06, down from 1,036 and 1,456 in 2015 and 2014, respectively. After an almost equally strong month, Boeing is now only off by 98 aircraft (record of 5,813 set in January 2016 vs. 5,715 at the end of December). Boeing booked 668 net new orders in 2016 – or a book-to-bill ratio of 0.89 – and beat its revised 2016 target of 535 orders. The company’s original forecast for 2016 was for 740-745 orders. Boeing booked 768 and 1,432 net new orders in 2015 and 2014, respectively. Airbus has now retained an order lead over Boeing every year since 2012.
For 2017, based on previously announced production rates, the author expects Airbus to easily surpass 700 deliveries and further narrow the gap in production between the two major plane makers. We can expect Airbus to deliver 730-750 jets during the year. The key for Airbus is to successfully manage the continued ramp-up in production of the A320neo and A350 and avoid further issues in its supply chain. Boeing can be expected to deliver 770-790 aircraft. For Boeing, the planned increase in the production of the 737 and a smooth transition to the MAX are critical. While Airbus’ impressive December order surge came as a surprise, the author expects backlogs to decline in 2017 for both companies. A level of 400-600 net new orders can be expected. 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. A decline in orders should not be a major source of concern for jet makers. Backlogs are at or near 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 put immense pressure on their suppliers not only to deliver quality parts on time but also to cut costs.
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