Boeing And Airbus: The Order Battle In October 2016

| About: The Boeing (BA)

Summary

Looking at the net orders, Boeing is having a lead.

In October, Airbus booked 19 orders versus 85 orders for Boeing.

Wide body sales seem to be picking up for Boeing, but are still lagging for Airbus.

The order battle between Boeing (NYSE: BA) and Airbus (OTCPK:EADSF, OTCPK:EADSY) is one of the ways for the companies to flex their muscles, next to marketing their respective products as the best solution with the highest fuel efficiency and passenger comfort. Despite the fact that the orders (in terms of value) are in no way a reflection of financial performance, it is important to have a look at the order inflow, since it gives a nice idea of which manufacturer offers the best mix of discount, comfort, slot availability and efficiency.

In this article, I will have a look at the order inflow during October for both manufacturers and have a look at their role in the narrow- and wide-body market.

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Overview October

In October, Airbus and Boeing together hauled in 104 orders compared 93 last year. Looking at the division of the orders Boeing can be marked as the clear winner. Airbus received 19 orders, while Boeing received 85 orders.

Boeing had a good month with a focus on wide-body order inflow:

  • Almost half of the orders came from Qatar Airways, which ordered 30 Boeing 787-9 aircraft and 10 Boeing 777-300ERs.
  • Swiss International Air Lines placed a follow-up order for one Boeing 777-300ER.
  • UPS (NYSE: UPS) placed an order for 14 Boeing 747-8F aircraft.
  • Two unidentified customers ordered 12 and five Boeing 787-9 airframes, respectively. The order for 12 units likely comes from China Southern Airlines (OTCPK:CHKIF).
  • Two unidentified customers ordered six and two Boeing 737MAX airframes, respectively.
  • An unidentified customer ordered five Boeing 737-900ER aircraft.

The full report for Boeing's orders and deliveries in October can be found here.

For Boeing it was an important month. The jet maker received orders for two wide-body programs, the Boeing 777 and Boeing 747, that are facing some difficulties and received follow-up orders for the Boeing 787.

The Boeing 747 program up until recently had a high probability of being shut down. With a lower production rate and 17 net orders for the year, Boeing seems to have guaranteed the line to remain open for years to come.

On the Boeing 777 program the jet maker saw some order inflow, which helps the company in closing the production gap as it transitions towards the production of the Boeing 777X. Although Boeing received 17 net orders for the type in 2016, I do think it is likely that we will see a further trim.

The order inflow for Airbus was solely for its narrow-body product:

  • An unidentified customer ordered two Airbus A320ceo aircraft and three Airbus A321ceo aircraft.
  • A second unidentified customer ordered 10 Airbus A320neo aircraft.
  • A third unidentified customer ordered four Airbus A319ceo aircraft.

The full report for Airbus' orders and deliveries in October can be found here.

Order inflow for Airbus was not really exciting. It seems that Airbus is having problems securing orders for the Airbus A330neo and the Airbus A350. Currently, the pricing of the Airbus A330ceo is sufficiently compelling for airlines to order the airframe instead of the new engine option. The full report for the September orders can be found here.

In terms of units, Boeing had a better month than Airbus. Also in terms of value Boeing had the upper hand, booking $10.9 billion worth of orders versus $0.9 billion for Airbus.

Overview year-to-date

Click to enlarge

Figure 1: Infographic Orders October (Source: AeroAnalysis.net)

Airbus received 190 cancellations, including 24 swaps, leaving the jet maker with 395 net orders year-to-date. Boeing received 545 orders and 88 cancellations, bringing its net orders to 457. Looking at the net orders, Boeing is having a lead over Airbus with only 2 months remaining in 2016.

Order inflow in October was focused on wide-body aircraft: Almost 70% of the orders were for wide-body aircraft and Boeing was the jet maker that has added all these orders to its backlog.

Conclusion

Boeing had a good month with strong order inflow. For Airbus, the order inflow for wide-body jets is not picking up pace yet, but I think this has to do with the novelty of its wide-body products.

Up until June, Boeing and Airbus had been following different paths. Airbus was lagging behind, while Boeing seemed to have a good first 6 months. It took Airbus just 2 months to take the lead. Looking at the net orders, Boeing currently has a lead over Airbus.

Airbus's orders from January up until October fell by roughly 35% year-over-year, due to soft order inflow so far in 2016. Boeing's orders are roughly 2% lower, closing the gap from 8% last month. Boeing actually did not have a lot of big orders to be announced during the Farnborough Airshow, while Airbus did. This led Airbus to completely close the gap and end on top of Boeing in just 2 months, but it also had to scrap orders a month later which turned the tables.

The total order inflow for both jet makers, combined, has been roughly 25% lower in the first 10 months of this year. Many analysts are expecting a slowdown in order inflow. Up until June, there was no slowdown visible, but after the month of July, the challenging environment to accumulate orders has become visible. I think order inflow could fall by as much as 5-20% this year, where Airbus is likely to perform worse than last year.

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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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