We now have the third quarter 2016 numbers, and taking the opportunity to review how things are going at Airbus and Boeing.  It seems that the softening of sales is a reality.  This seems awkward because the transition from current generation to next generation models is not going as smoothly as we had been led to believe.  This means gaps and either white tails or production cutbacks.  Take a look at the following charts for Boeing and Airbus.  The ten-year super-cycle, with high order levels, has now wound down, with fewer orders on the horizon.

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It is lonely at the bottom and top of the business.  Airbus is delivering rapidly into its single aisle backlog.  That is to be expected; they want to get as many of those aircraft out before the bubble bursts.  The bright spot is the A321, which continues to attract market attention.  The bad news in the narrow-body side is that A320neo deliveries are delayed due to production issues with the Pratt & Whitney GTF engine, which is behind in its delivery schedule.

Being the largest and most expensive model in the narrow-body series, the A321 orders are great news for Airbus.  On the wide-body side, the A330, which should have been in the twilight of its career, is the energizer bunny – it keeps going and going. The neo version means more orders should be forthcoming. It appears that the transition from ceo to neo will be smooth for the A330.  Perhaps which is why there have been few orders this year – when the neo starts flying the customers will step up and many will retire older A330s to acquire A330neos.  Or perhaps it is that, at low fuel prices, the A330 remains competitive.

The A350 looks almost in balance, but of course it’s not. Airbus is way behind on deliveries. The supply chain continues to cause angst.  If deliveries were going better, there would almost certainly be more orders.  And the Boeing order by Qatar would probably be smaller.  At the top, the A380 waits for the market to catch up.  To better balance things Airbus has slowed deliveries.  This probably suits everybody except Emirates, which wants more of these aircraft ASAP.

Next let’s take a look at Boeing.

jjThe 737-700 saw a blip this year from United’s order, otherwise it would have as much as the interest in the A319.  The low delivery levels show that Boeing is looking to the larger models, and likely gave United quite a deal to keep them from going to Bombardier (which we understand was the preferred choice).  The big winner at Boeing is the 737-800.  It is churning out two 737s per day at Renton – the 737 deliveries equate to 39 per month.  This is amazing productivity from one factory.  There were no -900 orders this year so far.  This is a sensitive issue at Boeing, especially compared with the heavy interest in the equivalent A321 at Airbus.  No wonder Boeing was considering another MAX revision to remain competitive.

There continues to be demand for the MAX, of which probably 85% are likely going to be the -8MAX.  Boeing won’t separate the numbers because they are likely to be as skewed as the NG – neither the MAX7 nor MAX9 are popular, even after the redesign of the MAX7.  Their order book highlights weakness at the lower and upper end, and Boeing doesn’t like to highlight its weakness.   Boeing can’t afford to allow Airbus to clean up at the larger, and most profitable, end of the narrow-body market.

The 747 continues life as a freighter, but that has been difficult since the freight market has slowed.  Once the new Air Force One aircraft are delivered, 747 production could cease. It would be a day nobody would celebrate as this aircraft is truly an aviation icon.  The 767 survives because of the USAF tanker program and deliveries of freighters for FedEx.

The 777 now has a significant production gap, and is an example of what happens when you have a supply demand imbalance in favor of supply.  It must be a great time to buy a 777-300ER, as they must be available at once in a lifetime pricing.  No doubt this helped Mr. Al Baker’s decision at Qatar Airways.  The current backlog is weak.  This means Boeing has to ensure the 777X is on time, and that does not appear certain.  But we shall wait and see.

The 787 should be a shining star – it is the future in many ways.  Deliveries are outpacing orders handily.  Boeing has been eating away at the 787 backlog and no doubt is also looking at aggressive pricing.  (Advantage Mr. Al Baker, again) But as we see with Airbus, the midsize twin market is soft right now, and we would expect continued backlog erosion.

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