Boeing Sales Impress

Summary

• Boeing could add 600 orders in the near future coming from order announcements during the air show.
• Value orders and commitments including service contracts is $82B.
• Boeing managed to sell 50 Boeing 787 and 6 Boeing 777, showing some satisfying wide body order inflow.

The Paris Air Show took place from the 19th of June until the 25th of June and the first four days have been used to announce orders. In the days after, I have been splitting and verifying the data, and if we include everything, we get a total of 1,483 orders, customer reveals, options, and conversions valued $137.9B at list prices. After discounts, the market value of all these orders is likely closer to $63-69B for Boeing (NYSE:NYSE:BA), Airbus (OTCPK:EADSF), Embraer (NYSE:ERJ), ATR, and Bombardier (OTCQX:BDRAF). There are a lot of splits that can be made, and in this article, I want to focus on what the air show meant for Boeing.

Source: financialexpress.com

General overview

Before I start splitting the data, it is important to understand that this article is not going to be the sum of the 'sub-articles' that I wrote to cover the daily order news during the show. The reason for this is that some orders were hidden in wrap-up press releases, while for some orders, the type of order needed to be changed. The conversions have also been valued on their added value from sizing up the order, instead of the full aircraft catalog value. So, that is going to be quite a substantial difference. In the order and commitment tallies, customer reveals, 35 in total, will not be accounted for as an order or commitment nor will their value be added. The reason is that these order reveals do not materially change the order books of jet makers or add value. Type conversions for options, 10 in total, are counted in the separate tallies since they do add potential value from sizing up or down from one aircraft type to the other.

The first split we make is by taking out the customer reveals, which add no value, and have a day-by-day look:

Figure 1: Orders and commitments by day (Source: www.AeroAnalysis.net)

Boeing accumulated 955 orders and commitments with a value of $93.5B.

Firm versus order intentions

We can split this overview even further by making a distinction between firm and intention letters:

Figure 2: Orders and commitments by day split by order status (Source: AeroAnalysis)

What we see is that roughly 40% of the orders are firm orders, while 60% of the announcements can be considered ‘hot leads’ for Boeing and that gives a bit of insight in what business Boeing could secure in the near future. The firm orders can be valued at $28.7B, while the order intentions can be valued at $64.8B.

One thing that skews the picture quite a bit is conversion news. Conversions do not alter the tally and with the launch of the Boeing 737 MAX 10 there were quite a few of them, but do increase the value a bit from sizing up. If we compensate for conversion, things change a bit. Order intentions drop from 563 to 537, while firm orders drop from 392 to 204, totaling 741 versus 955.

That shows quite well how conversion news has impacted the order tallies, while they are not new orders.

The next split we can make is the split between new business, options and option conversions. What we then see is that firm orders were only 154 units and leads for 437 units to be added to the order book in the near future. Options and option conversions (conversion for options for Aircraft A to Aircraft B), made up for 15% of the orders and commitments.

In terms of value, the first row of the table is what Boeing can reasonably expect to add to the order book within now and a year, which would $76B plus the added value of the conversions.

Beforehand analysts were expecting quite a tranquil Paris Air Show, so $76B in sales is quite impressive. On top of that comes $6B in services contracts, which would push the total to $82B.

Conversions excluded, lessors accounted for $44.8B of the order value while airlines signed agreements worth $46.8B. So, the split between lessors and airlines was 50:50. Asian airlines signed for almost a third of the orders reflecting strong demand in the region.

Aircraft type

Figure 3: Orders and commitments by aircraft type (Source: AeroAnalysis)

If we look at new business (firm as well as LoI/MoU but excluding options and conversions) we see that, as expected the Boeing 737 MAX was the most popular aircraft, but the Boeing 787 accumulated 50 orders and commitments followed by the Boeing 777 with 6 orders and commitments. A big positive, in my view is the continued order inflow for the Boeing 787.

Conclusion

Beforehand analysts were expecting a tranquil air show, but even if we filter out the conversion noise, the air show has been quite successful for Boeing with 591 orders or order intentions with some strong order inflow for the Boeing 787 as well. For investors, the air show demonstrates that Boeing has a strong product line up that appeals to customers around the world and we are seeing a slight uptick in order activity for wide body jets as well.

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Analyst’s 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.