Analyzing the MAX order book

Boeing has still not released their orders for MAX by model number. This requires that one must go through the orders and create the data. Having done that, we can see there is one small discrepancy with Boeing’s own order numbers. Focusing on the MAX is important since it sits in the heart of the commercial airline business. In the following table, we have dissected the orders for the MAX using both Boeing’s data and our own analysis of public order statements. Note our analysis runs from January 2011 (the launch year) through June 30th, 2018. Therefore, none of the recent Farnborough news is included. The 19 difference is due to the public order by Qatar for 20 MAX8s while Boeing lists only one. Boeing has not responded to our request for clarification. We suspect the remainder are to be found in a lessor's order. Another interesting view on these orders is the sheer number of orders that do have a model defined. Our analysis shows over 36% of the deals have no model selected. Note that 54.1% of that is found in the “Unidentified” row. However, it worth pointing out the deals with no model specified. Excluding the Unidentified row, we have only 180 of the total orders. The leasing firms want to retain maximum flexibility. Yet why do they require this when the MAX8 accounts for half of all orders? Selecting some of these deals for the MAX8 seems rather a low risk. The leasing companies tend to place orders for the MAX7, list these as undisclosed, and change them later as they see customer demand. Leasing, after all, is a cash flow game, and Boeing is willing to help its customers in any way it can, within reason. The airline brands listed are operators that may be regarded as somewhat risky – Arik has financial trouble and UTair is based in Russia. Then we have a second tier of customers that have selected their initial model, but also retain a large block in the unidentified model column. Listed just below Hainan is GECAS, which has already selected 86% of its MAX orders as -8s. In this group, it must be flexible and keeping competitors off guard that drives this. Certainly, lessors are focused on flexibility and no doubt have a deal with Boeing to switch models as needed. Making the deal allows for a delivery slot which is important. For the airlines, flexibility is important as market demands may allow for upsizing. But it is also important not to telegraph fleet decisions too soon and allow competitive responses. This group accounts for 906 orders or nearly 18% of the total. Together with the first group mentioned, Boeing has over 36% of its MAX order book with no model selected. This provides its customers with substantial flexibility. If we were to assume this sends a signal of strength, then it is important to consider that these numbers need a context. The chart below illustrates this context - even offering customers great flexibility hasn’t helped Boeing very much. Airbus is way ahead in the single-aisle market.

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