As part of the annual order and delivery battle between Boeing (NYSE: BA) and Airbus (OTCPK:EADSF/ OTCPK:EADSY) I provide a monthly overview and analysis. The June report can be read here. In this article, I will have a look at the orders and deliveries in July. Click to enlarge
Figure 1: Airbus orders (up until) July 2016 (Source: AeroAnalysis.net)
In June, Airbus booked 27 orders, with 0 orders for its wide body product and 27 orders for its narrow body aircraft. In July, Airbus booked 146 orders, a strong month-over-month improvement.
At list prices, the orders are valued at $18.5B, but after discounts the orders have a market value of $8.9B:
- Germania ordered 25 Airbus A320neo aircraft during the Farnborough International Airshow
- Synergy Aerospace ordered 62 Airbus A320neo aircraft during the Farnborough International Airshow
- Virgin Atlantic ordered 8 Airbus A350-1000, the first order inflow for the -1000 since December 2013
- Aer Lingus ordered 2 Airbus A330-300s
- Cebu Air ordered 2 Airbus A330-300s
- Allegiant Air (NASDAQ:ALGT) ordered 12 Airbus A320ceo aircraft
- JetBlue (NASDAQ:JBLU) ordered 15 A321ceo and 15 A321neo aircraft
- An undisclosed customer ordered 5 A320neo airframes
Compared to July 2015, order inflow increased significantly. But this has everything to do with order announcements being saved up for the Farnborough International Airshow that took place in July. So it is not possible to make a meaningful year-over-year comparison this month. During the first 7 months of 2016 Airbus received 373 orders versus 408 orders in the first 7 months of 2015, an 8.6% decline.
Figure 2: Airbus deliveries (up until) July 2016 (Source: AeroAnalysis.net)
Whereas Boeing guided lower, Airbus expects to be able to increase production year-over-year and has set a target of delivering more than 650 aircraft. To meet its delivery target Airbus will have to deliver 62 aircraft monthly.
Deliveries were sharply lower than the monthly 59 that are needed on average, but this was already partly compensated for last month.
- Deliveries for the A320 were lower than the average expected figure
- Airbus delivered 2 A330-200s
- There were no Airbus A380 deliveries
- Airbus delivered 3 A350 airframes to 3 customers.
- Airbus A350 deliveries continue to fall behind of expectations
Airbus delivered 4% less aircraft in the first 7 months of 2016 compared to 2015. This likely has to do with the problems Airbus is facing on the A320neo, but should be compensated for in the second half of 2016 when these issues have likely been fixed. Additionally, Airbus is facing supply chain issues on the Airbus A350 which causes delays in deliveries.
Last year, Airbus had a book-to-bill ratio in excess of 1.5. Also, in 2016, the jet maker expects to be able to book more than 1 order for each airframe it delivers. In July, the book-to-bill ratio was 3.6, reflecting low delivery volume in combination with order announcements being held off until July. Year to date, the book-to-bill ratio including cancellations is .95. Despite orders inflow and deliveries picking up pace throughout the year, the road towards reaching its targets will be a long one for Airbus.
In this month's customer spotlight, we have Virgin Atlantic. Virgin Atlantic commenced operations in 1984. The airline currently serves a total of 31 destinations with a fleet of 39 aircraft. The airline operates flights from the UK to destinations in North America, the Caribbean, Africa, the Middle East and Asia.
The airline is one of the few in the world to still operate the Airbus A340 and the Boeing 747-400. Currently the fleet is almost equally divided between Boeing and Airbus. However, with only 4 unfilled orders for the Dreamliner with options for another 5 and 12 orders for the A350-1000 to replace the Boeing 747-400, the fleet will soon be dominated by Airbus.
The airline also has the Airbus A380 on order, but is unlikely to take delivery.
Airbus expects its order book to grow in 2016 and is currently pretty close to a book-to-bill of 1. More concerning, however, are issues on the Airbus A320neo program and Airbus A350 program that could negatively impact Airbus' 2016 deliveries. The July month has put Airbus better on track to have a chance reaching its desired book-to-bill. The jet maker is facing 2 more important issues at the moment. Deliveries, which impact current earnings, are lower due to an unsmooth transition from the A320ceo production to A320neo production and a failing production ramp up for the A350.
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Disclosure: I am/we are long BA.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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