Airbus O&D through October 2018

To get an idea of just how far back Airbus orders are this year, look at this chart. The last year Airbus had so few single-aisle orders was 2009 - but the year after that was one of their best. The twin-aisle segment has also had a tough year - following several others. The company's hopes rest on the A350 and A330neo. The latter has seen some success of late. There is no sugar coating 2018 for Airbus, it has been a tough year sales wise. There are likely to be many explanations - Leahy leaving, Schultz's short stay and generally high-level management changes. Any way you cut it, it looks like being a sales bomb. The sales teams are likely under pressure as before to end the year on a high note. But the gap is not just big, it is vast. However, the A320neo and A321neo are clearly successful programs. Especially the A321neo. Looking at deliveries we see these charts. Airbus looks like it could match, or perhaps beat last year's number. But engine deliveries plagued the A320neo program this year. Airbus is not alone in this, Boeing has faced the same supply chain problems. The new A220 family barely impacts the numbers. There is a lot of work to do in Mirabel yet. Airbus has some work to do on the A350-900 program, which seems to have slowed this year. The A330ceo also slowed, but that may be partly due to switching some work to the A330neo program. The A330ceo program has been a reliable source of work every year - the A330-200 seems to be fading. Recent orders for the A330-800 are encouraging given the fading of the A330-200. Airbus must hope the A330neo replaces the A330ceo program soon. In summary, can Airbus use its senior management disruptions as a reasonable excuse for slow orders this year? Perhaps, but this is surely a limited excuse. A more plausible explanation might be market fatigue - the backlog is so large and perhaps the big orders have been placed. The concern at the customers has to be on deliveries now. The deliveries at Airbus have been stymied by P&W, CFM, and Rolls-Royce. The impact of engine delays is plain to see. The good news is that CFM and P&W seem to have started to get their production lines ramped up. CFM is squeezed by Airbus and Boeing. P&W is on several programs and facing a ramp up it hasn't seen since World War 2. Rolls-Royce faces technical challenges which it will overcome - but this could take more time. Their troubles on Trent 1000 has generated downstream impacts on production, but concerns about blade fatigue have also seeped into the Trent XWB and 7000. This has to be of critical importance to Airbus and the 7000 powers its A330neo. And on the A330neo there is tremendous pressure from the 787-program and Boeing's determination to "do whatever it takes" to hobble A330neo sales. Boeing sees what ignoring the lower end of the middle of the market has allowed Airbus to achieve with their A321. Boeing will not want to allow the A330neo any success because not only does this hamper 787-8, it also closes the market for the 797. Consequently, the Trent 7000 delivery problem is actually far more harmful to Airbus than is generally realized. Bottom line On single-aisle, we are seeing the result of the tremendous sales in previous years. For example, if an airline or lessor wants an A321 today, they get a delivery position about five to six years from now. Airbus as an extremely healthy backlog and one cannot expect it to sell substantially more aircraft than it delivers forever. At the end of October 2018, the A320 backlog was about nine years of production at current rates (7,386 aircraft). That nearly-7,400 aircraft backlog compares to a backlog figure of only 6,645 at the end of October 2017 – a much smaller figure, due to the very high number of A320 Family orders in November/December last year. As we have said before, focus less on orders and more on deliveries. And in that regard Airbus is suffering from supply chain stress and this is not unique to them.

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