Airbus Books $3.4 Billion Worth Of Orders

| About: Airbus SE (EADSF)

Summary

Airbus booked 68 orders in April.

We continue to believe Airbus will be able to scale up output this year.

Improvement in A320neo delivery profile should become visible in coming months.

Each year, Boeing (BA) and Airbus (OTCPK:EADSF) engage in a fierce order battle. In 2017, Airbus won that battle by numbers, but in terms of dollar value, which AeroAnalysis ultimately considers to be more important, Boeing easily outperformed Airbus.

Source: Behance

For 2018, Airbus expects to maintain a book-to-bill ratio of 1. By looking at the orders, we can see a combination of willingness to commit, pricing, product, and availability come together. Special attention will be paid to the mix of single-aisle aircraft and widebody aircraft, knowing that a single-aisle aircraft costs roughly half or a third of a wide-body aircraft depending on the model.

In this article, AeroAnalysis will be having a look at the order inflow and deliveries for Airbus in April. The March report can be read here if you are a PRO subscriber or is freely available to our Premium subscribers.

Order inflow April 2018

Figure 1: Orders Airbus April 2018

During the month of April, Airbus received a total of 68 orders:

  • Druk Air ordered 1 Airbus A320neo.
  • An undisclosed customer ordered 3 Airbus A320ceo aircraft.
  • Scandinavian Airlines ordered 35 Airbus A320neo aircraft and 1 Airbus A330-300.
  • Allegiant Air ordered 1 Airbus A320ceo aircraft.
  • An undisclosed customer ordered 5 Airbus A319ceo jets and 22 Airbus A319neo jets.

In April, Airbus landed some important orders for its Airbus A319neo jet. The smallest members of the Boeing and Airbus line up don’t sell well so any order inflow that either jet maker does get is more than welcome. Despite being only one unit, Airbus managed to book an order for its wide body jet, but it had to reduce the Airbus A350 order book by 22 orders as American Airlines (AAL) has selected the Boeing 787 instead of the Airbus A350, we discussed the switch from Airbus to Boeing in a separate report, which can be accessed by PRO subscribers or by subscribers of the AeroAnalysis Marketplace service (best value). Airbus also had to scratch 5 units from its Airbus A320neo backlog totalling 27 cancellations during April.

It's likely that Airbus is saving up order announcements already. So far order numbers are not blowing us away, but it has to be noted that the jet maker doubled its gross orders in April and comparing the first 4 months this year to last year we observed that order inflow increased by 85 units and net orders improved by 63 units.

Last year, Airbus received 25 orders in April which included widebody orders, while 8 orders were canceled. In April 2016, Airbus received 85 orders while 3 aircraft on order were scratched from the order book. Averaging the net orders for the previous two years shows that with 41 orders the net order inflow was below the average of 49.5 orders.

For April, the list price of the orders was $7.3B, but after discount, this likely is closer to $3.4B.

Deliveries in April 2018

Figure 2: Deliveries Airbus April 2018

For 2018, Airbus has set a delivery target of 800 units. In April, Airbus delivered 51 aircraft or 6.3 percent of the aircraft it expects to deliver in 2018:

  • Emirates, Qatar Airways and Singapore Airlines (OTCPK:SINGY) each took delivery of 1 Airbus A380.
  • Airbus delivered 1 Airbus A330-200 to Tibet Airlines and 3 Airbus A330-300s to Chinese carriers.
  • Airbus delivered 8 Airbus A350 aircraft, which is in line with the production rate.
  • Deliveries for the Airbus A320 families were 19 current engine option aircraft and 17 new engine option aircraft.

Year over year, Airbus deliveries in the first 4 months decreased by 10 units reducing the gap compared to 1 month ago. The decrease can be attributed to lower deliveries of the Airbus A320ceo family deliveries, which are not being offset by neo deliveries and lower A330 deliveries, which are offset by higher Airbus A350 and A380 deliveries. A320neo family deliveries increased by 11 units, which is OK considering the problems Airbus faces on the A320neo program specifically. Compared to the annual delivery target, Airbus slipped somewhat, but we have little doubt that we will see a massive increase in deliveries by year-end.

For the A320neo, the story of a strong product with engine problem still holds. Deliveries of PW1100G geared turbofans resumed, so in the coming quarter we should be able to see some recovery in the delivery profile for the Airbus A320neo.

Book-to-bill ratio

For 2018, Airbus expects to maintain a book-to-bill ratio of 1. For Airbus, reaching desired book-to-bill ratios doesn't seem like a big challenge, but there should be more emphasis on capturing more widebody orders in the mix, especially given the challenges Airbus is facing with the Airbus A320neo. Looking at the monthly book-to-bill ratios does not say a lot, but you have to start somewhere. In April, Airbus booked 68 gross orders while delivering 51 aircraft indicating a 1.33 gross book-to-bill ratio. In terms of value, this ratio was .83. For the first 4 months, the gross book-to-bill ratio is .9, which means that Airbus has to step up its game in the coming months but it did show a significant improvement in April. A strong Farnborough Airshow order rain could help the European jet maker.

Conclusion

In April order inflow picked up. For Airbus, the biggest challenge is not book the orders to get to the desired book-to-bill ratio but to roll out the jets without delays. On the Airbus A320neo program, deliveries didn’t pick up pace yet due to engine issues. We expect to see some normalization to the delivery pattern in the second quarter. On the Airbus A50 program we are seeing a strong improvement in deliveries, which we expect to continue throughout the year.

We continue to believe that Airbus deliveries will pick up pace and peak towards the end of the quarter extending all the way to the end of the year.

Disclosure: I am/we are long BA, EADSF.

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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