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: The Boeing Company
For 2018, Boeing expects order inflow to be moderated. That's a pretty vague term, but it does not make it less interesting to look at orders and deliveries on a monthly basis to assess the overall appeal of aircraft on the commercial market. By looking at the orders, we can see a combination of willingness to commit, with pricing, product, and availability coming together. Special attention will be paid to the mix of single-aisle aircraft and wide-body aircraft, knowing that a single-aisle aircraft costs roughly half or a third of a wide-body aircraft, depending on the model.
In this report, AeroAnalysis will be having a look at the order inflow and deliveries for Boeing in May 2018. If you have missed the April edition, you can read it here. The article is paywalled but is freely available to subscribers and trial members of the AeroAnalysis Marketplace service.
Orders in May
Figure 1: Orders Boeing May 2018
During the month of April, Boeing received a total of 78 orders valued $7.8B after discounts:
- BOC Aviation ordered 3 Boeing 787-9.
- Lufthansa (OTCQX:DLAKF) ordered 2 Boeing 777Fs for Lufthansa Cargo and 2 Boeing 777-300ER for Swiss International Air Lines.
- Qantas (OTCPK:QUBSF) finalized an order for 6 Boeing 787-9s replacing the Boeing 747-400 in the fleet.
- The US Navy ordered 10 P-8A Poseidons.
- Three unidentified customers ordered 2, 5 and 14 Boeing 737 MAX aircraft, respectively.
- Two unidentified customers ordered 1 Boeing 787-8 each.
- One unidentified customer ordered 4 Boeing 787-9s.
Cancellations increased from 65 to 70. The order from BOC Aviation is an order swap where Air Europa gave up its slots and those were subsequently taken over by the lessor who will make the airframes available to the airline via a long term lease arrangement. Two Boeing 737 were canceled as well, this likely is a NG-to-MAX swap.
The unidentified order for 14 Boeing 737 MAX possibly is an order from SB Leasing Ireland, who will lease the aircraft to Russian Ural Airlines.
May was a below-average month where Boeing booked 43 orders versus the three- and five-year average of 50 and 92 units, though the order mix was appreciable. In the first five months, Boeing booked 306 net orders versus 208 net orders last year. So, Boeing is having a strong first half of the year and it will be interesting to see how many new orders they will announce during the upcoming Farnborough Airshow.
Deliveries in May
Figure 2: Deliveries Boeing May 2018
For 2018, Boeing has set a delivery target of 810-815 units. In December 2017, AeroAnalysis set a 2018 delivery target of 816 units at the low end. Boeing is more or less meeting our expectations here.
In May, Boeing delivered 68 aircraft, up 24 units from a month earlier:
- Boeing delivered 47 Boeing 737 aircraft, including 19 of the MAX variant. Deliveries were finally back in line with production rate.
- Boeing 787 deliveries were in line with the production rate of 13 aircraft per month.
- Boeing 777 deliveries were above the production rate of 3.5 aircraft per month for the Boeing 777 Classic.
- The Boeing 767 and Boeing 747 deliveries are more or less driven by the delivery schedules of airlines during the year than by slot availability. No deliveries took place for the Boeing 747 and two deliveries took place for the Boeing 767.
Delivery volume during showed a strong improvement month-over-month. The key programs for Boeing, namely the Boeing 737, Boeing 787 and Boeing 777 all showed satisfactory outputs. We expect June deliveries to be either in the same range or marginally higher with a big uptick in the second half of the year.
For 2018, Boeing remained somewhat vague on the subject of the book-to-bill ratio, expecting "moderated" order inflow.
Obviously, shareholders are hoping to see Boeing having a book-to-bill ratio of 1 or higher for the full year, but AeroAnalysis currently is expecting it to be between .7 and .9.
In May, Boeing booked 43 gross orders while delivering 68 aircraft, indicating a 0.63 book-to-bill ratio driven by a recovering delivery profile. In terms of value, this ratio was 0.82 reflecting strong order inflow for the Boeing 777 and Boeing 787. For the first five months of 2018, the gross book-to-bill is 1.27 and 1.44 in terms of a value. So Boeing is having a year so far.
In May, Boeing booked some important orders for the Boeing 787 and Boeing 777 while the jet make saw some order inflow for its single aisle program as well including orders for the P-8A Poseidon.
Overall, we do expect that Boeing will be able to meet its delivery target though there likely will be pressure on the delivery schedules of the Boeing 737 and Boeing 787. Looking at orders, Boeing has quite good momentum as it captured some key customers for its aircraft, but the pool is finite, meaning that Boeing is going to depend more and more on repeat orders going forward.
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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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