By J. Kasper Oestergaard, European Correspondent.
Boeing and Airbus delivered 71 and 57 commercial jets in March 2016, compared to 71 and 51 in the same month last year, respectively. In 2016, to date, Boeing and Airbus are still trailing last year’s delivery figures and had delivered 176 (184 in 2015) and 125 (134 in 2015) commercial jets, respectively, as of March 31.
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. For 2016, Airbus aims to hand over more than 650 jets, an increase of 15, or 2.4 percent, from 635 last year. Boeing, by contrast, has announced that deliveries could drop by 22, or 2.9 percent, to 740 from last year’s record of 762 deliveries.
Boeing has been able to increase deliveries significantly in recent years, mainly due to the ramp-up in production of the 787 Dreamliner (135 delivered in 2015). Airbus is slowly ramping up deliveries of its A350 XWB and this, combined with a higher A320 production rate of 46 per month from Q2 2016, means that the company will soon begin to narrow the gap in the deliveries race. In March 2016, Airbus delivered 47 A320s, five A330s, three A350s, and two A380s. Earlier this year, on January 20, the company delivered the first A320neo, to German legacy carrier Lufthansa. With three A350 deliveries during the month of March, Airbus has now delivered 19 aircraft of this type to date (first delivery in December 2014). The company expects to deliver more than 100 A350s in 2018, when the production rate hits 10 per month. In March, Boeing delivered 46 737s, 12 777s, and 13 787s.
In the orders race, both companies had an unusually weak month in February of this year, with only three net new orders combined. In March, Airbus had another poor month, with one net cancellation (14 gross orders minus 15 cancellations). During the month of February, Airbus landed orders for one ACJ319neo (bizjet configuration) from a private customer, four A330-200s for Airbus Defence and Space for conversion into the Multi-Role Tanker Transport (MRTT) configuration, seven A320neos for CSA Czech Airlines, and two A380s for an undisclosed customer. Boeing had a fairly good month and booked 54 net new orders (69 gross minus 15 cancellations) during the month of March, including orders from undisclosed customers for 25 737-700s and 10 737-800s. Also, Boeing landed an order from Miami-based Eastern Air Lines for 10 737 MAX 8s and an order for five 737-800s for Pegasus Airlines. Then, at the end of the month, on March 31, Boeing received a rare order for four 747-8 jumbos from an undisclosed customer. Boeing currently plans to raise its 737 production rate from 42 per month today to 47 and 52 in 2017 and 2018, respectively. In January 2016, Boeing’s CEO, Dennis Muilenburg, announced that demand supports a further increase to 57 737s per month in 2019.
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. In 2015, net new orders for both Boeing and Airbus were significantly down from 2014 levels, due, among other factors, to the sharp decline in the price of oil. Cheaper oil makes it financially more attractive for airlines to keep operating older, less fuel-efficient aircraft. On January 20, the U.S. WTI oil price closed at $26.68, the lowest level since May 2003. As of the afternoon of Monday April 11, the price of WTI crude (NYMEX May futures) was trading at $40.38.
Airbus’ order backlog as of March 31, 2016, stands at 6,716 jets (of which 5,479, or 82%, are A320 narrowbodies), ahead of Boeing’s 5,740 (of which 4,380, or 76% are 737 narrowbodies). The number of Airbus aircraft to be built and delivered represents a 10-year backlog (10.58 years of production). In comparison, Boeing’s backlog would “only” last 7.53 years at the 2015 production level.
An important question for the industry is whether the massive backlogs peaked in 2015 or will continue to grow throughout 2016. The industry is off to a slow start in 2016, but new orders were equally slow in the beginning of 2015. Airbus is 91 net orders down so far this year compared to January-March 2015, while Boeing is up six. The end result is still too early to call, but it is the author’s firm belief that backlogs will decline in 2016, due to slower GDP growth and low oil prices. According to both Airbus and Boeing, the demand for passenger aircraft is tied to the growth in worldwide revenue passenger miles (RPMs), which again is highly correlated with global GDP growth.
Boeing 777 Rate Cut Announced
Boeing and Airbus are both facing challenges going forward. Boeing is struggling to bridge the gap in production between its current-generation 777 (777F and 777-300ER) and the future 777X to maintain the current production rate of 8.3 per month (100 per year). The 777 is a very profitable aircraft for Boeing and an important “cash cow.” In 2015, Boeing only booked 38 orders for the 777 (16 777Fs and 22 777-300ERs). In recent months, we have made the case that Boeing will likely cut the rate to first seven per month (84 per year) and later six per month (72 per year). On January 27, in connection with the presentation of the company’s 2015 financial results and forecast for 2016, Boeing’s CEO Dennis Muilenburg announced that the company will reduce the 777 production rate by 16 percent in 2017 to 84 aircraft per year. Boeing also indicated that in 2018, as it begins to build the first of four 777X test aircraft, production of the current-generation 777 will likely sink below seven per month. We would like to emphasize that without a large increase in orders, Boeing could very likely be forced to cut the rate to six per month as early as 2017. Boeing has remained upbeat on the 777 order intake for quite some time, but orders are simply not coming in fast enough and in sufficient quantities.
Airbus Ramping Up A320 and A350 Output
Airbus faces challenges now that production and deliveries of the A350 XWB will be ramping up in the coming years. The company plans to produce 10 aircraft per month by 2018. Also, the company plans to increase the monthly production rate of the A320 to 46 in 2Q 2016, then 50 by early 2017 and 60 by mid-2019. The company delivered the first A320neo in January 2016. Airbus has officially opened its new A320 final assembly line in Mobile, Alabama, the company’s first production site in America. The Mobile site is expected to reach an annual output of 40 to 50 A320 series jets by 2018. The first Mobile-assembled jet, an A321 for JetBlue, was completed on March 4, 2016, and took flight on March 21. The aircraft is scheduled for delivery to JetBlue in April.
Airbus Eases Planned A330 Output Cut
On February 24, Airbus adjusted its plans to cut production of its profitable A330 aircraft, easing the transition to newer models. The company now plans to build seven A330s per month from 2017, partially unwinding recent cuts in output to six from 10 per month as it prepares to ramp up A350 production and launch the A330neo.
Another major challenge for Airbus centers on the future of the A380 as the company considers launching NEO and stretch variants of the aircraft. The company has to make a tough choice: either 1) invest billions in developing the NEO and stretch to reduce the aircraft’s cost per seat mile; or 2) phase out the platform and terminate production when orders run out in four or five years. In December 2015, after a long order drought, Airbus was able to book an order for three A380 superjumbos from All Nippon Airways (ANA). The airline will be the first Japanese operator of the A380 and will take delivery of the first jet in 2019. ANA plans to use the planes on flights from Tokyo to Honolulu. Also, on March 31, 2016, Airbus booked an order for two A380s from an undisclosed customer.