Boeing June Order And Delivery Report: Parisian Euphoria

Summary

• Boeing booked 184 orders and delivered 75 aircraft in June.
• Boeing expects orders to trace last year's figure of 660 orders.
• After two months with plateauing sales year-over-year Boeing had a strong June month.

In 2016, I started covering orders and deliveries for Boeing (NYSE:NYSE:BA) and Airbus ( OTCPK:EADSF) with monthly reports and while this does not reflect current financial performance I will continue this coverage as it gives somewhat of an idea of current performance as well as ability for the respective manufacturers to grow order books and possibly earnings in the future on healthy order books. Next to that the order inflow is an almost direct reflection of the market environment on the commercial aircraft market. In this article, I will have a look at the orders and deliveries for the month of June. The May report can be found here.

Source: CBS News

Orders

Figure 1: Orders June 2017 (Source: AeroAnalysis)

Boeing started the year off strong accumulating 226 gross orders in the first three months. After that, sales plateaued resulting in Boeing’s cumulative order to fall year-over-year. This, however, was to be expected with the Paris Air Show being hosted in June. As expected, most of the deals announced as firm orders indeed have been booked by Boeing in their June order book update. Boeing booked 184 orders, 80 wide body jets and 104 single aisle aircraft:

• Paris Air Show Order; AerCap (AER) signed for 30 Boeing 787-9 jets.
• Paris Air Show Order; Aviation Capital Group signed for 20 Boeing 737 MAX 10 aircraft.
• Paris Air Show Order; China Aircraft Leasing Company signed for 15 MAX 10 aircraft and 35 MAX jets.
• Paris Air Show Order; El Al signed for 2 Boeing 787-8s and 1 787-9.
• Paris Air Show Order; Norwegian (OTCPK:NWARF) exercised options for 2 Boeing 737 MAX jets.
• Paris Air Show Order; Ryanair (RYAAY) ordered another 10 Boeing 737 MAX 200 jets adding to their commitment for 100 MAX 200 jets.
• Paris Air Show Order; United Airlines (UAL) ordered four Boeing 777-300ER aircraft.
• The Singapore Airlines deal (OTCPK:SINGY) has been finalized, reflected in the order book as an order for 20 Boeing 777-9 jets and 19 Boeing 787-10s.
• BOC Aviation ordered four Boeing 787-9 jets.
• Two unidentified customers ordered seven and 15 Boeing 737 MAX jets, one of which could possibly be assigned to a deal with Okay Airways during the air show.

During the month, cancellations increased from 46 to 57. Seven orders for the Boeing 737 MAX were canceled, while four Boeing 787 jets on order were canceled. These four cancellations can be attributed to Air Europa, which has canceled its order to receive the four aircraft that BOC Aviation ordered during the quarter.

It is noteworthy that while Qatar Airways’ CEO Al Baker said he placed a firm order with Boeing during the Paris Air Show, no orders were added to the Boeing order book.

With 184 orders in June 2017, order inflow increased by 172 units year-over-year reflecting the timing of the biennial air shows. The three-year and five-year averages for the order inflow in June stand at 89 and 114 orders, respectively. So it can be said that the order inflow was above average. At the same time, the average merely reflects the one month difference in the timing of airshows - The Farnborough Airshow usually takes place in July, while the Paris Air Show is organized in June.

For Boeing, order inflow picked up again as expected after two months of plateauing sales. In the first six months of 2017, Boeing accumulated 438 orders versus 310 orders in the same months last year.

Given that Boeing had 383 orders in July, it can already be said that Boeing is ahead compared to last year again. This fully fits the thought that Boeing has been saving up orders to announce in June and had a strong Paris Air Show.

Deliveries

Figure 2: Deliveries June 2017 (Source: AeroAnalysis)

In 2016, Boeing delivered 748 aircraft, slightly less compared to its record-breaking year in 2015. For 2017, Boeing aims to deliver between 760 and 765 aircraft which is more or less in line with the deliveries in 2015.

In June, Boeing delivered 75 aircraft divided between 26 wide bodies and 49 narrow bodies:

• Boeing delivered two Boeing 767-300F aircraft to FedEx (NYSE: FDX).
• No Boeing 747-8 aircraft were delivered. A total of 12 Boeing 787 aircraft was delivered, which is in line with expectations.
• Twelve Boeing 777-300ER aircraft were delivered compensating for the low delivery volumes in the first 2 months of the quarter.
• A total of 49 Boeing 737 aircraft were delivered including four MAX aircraft.

During the month of June, Boeing delivered four Boeing 737 MAX aircraft to two customers which can be considered the start of a delivery ramp up that is expected to take roughly two years. As expected, the lower deliveries for the Boeing 777 were fully offset in the last month of the quarter.

Book-to-bill ratio

For the full year, Boeing expects orders to roughly trace last year's order inflow, which would indicate 660 net orders or a book-to-bill ratio of .86. In June, this ratio was 2.45, purely reflecting accumulation of order announcements. In the first six months, Boeing booked 438 orders and delivered 352 aircraft. This implies a book-to-bill ratio of 1.24, which is higher than what Boeing expects for the full year. It remains to be seen whether Boeing can keep up the pace of order inflow in the remaining months of 2017, but the first six months have been strong for Boeing.

Plateauing sales over the last two months led to the book-to-bill to slip below 1 in May, but showed strong recovery in June as was to be expected. For Boeing it is key to continue finalizing order intentions that it announced during the Paris Air Show.

Customer Spotlight

Source: here

In this month's customer spotlight, we have Norwegian Air (OTCPK:NWARF). The airline commenced operations in 1993 as a regional carrier. Starting in 2002 the airline started focusing on low-cost activities as a domestic airline and subsequently also started focusing on the European market. In 2013, the airline established a long-haul arm that serves the United States with Dreamliner aircraft. The airline now has an extensive network in Europe and the US with 132 destinations in total.

The airline has a fleet of around 130 aircraft. The Boeing 737-800 forms the backbone of the short haul fleet, while the Boeing 787 and the Boeing 737 MAX complete the long-haul fleet. The jet maker took delivery of its first 2 Boeing 737 MAX jets in July and has more 737 MAX, 787 and Airbus A321neo aircraft on order.

Conclusion

As expected Boeing’s order book recovered in June after two months of plateauing sales.

After the strong June month, I am more positive about Boeing’s ability to accumulate orders in the remainder of the year.

The Boeing 787 is enjoying some continued order inflow, but I am not convinced about Boeing’s ability to sell enough aircraft to increase production. Also, most of the commitments announced during the Paris Air Show were for the Boeing narrow body products. So it remains to be seen how many wide body orders Boeing can add in the coming months.

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Analyst’s Disclosure: I am/we are long BA, AER. 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.