Is Boeing’s Concentration Risk Profile Improving? |

Last week, we compared Boeing and Airbus risks concerning concentration in aircraft models and customers based on deliveries over the last three years. But that, analytically, looks backward rather than to the future. Looking at order books is a forward look, and while orders can be changed or canceled, it provides us with better guidance on what the future might look like. The difference between recent deliveries and future deliveries identifies the direction of the trend in concentration and its associated risks.Airbus had 8,014 firm orders versus 5,783 for Boeing at the end of September, and there is no question that we’d prefer the larger order book if we had our choice of the two. The A321neo has become Airbus best seller and has essentially taken over the middle of the market that Boeing invented with their 757 and 767 models. A hot model can increase concentration, particularly if key customers place large orders.Trends are significant, however, and Boeing’s trend line appears to be improving despite the company's continuing problems. Of course, Boeing will need to execute well on those future orders, something it hasn’t been able to accomplish recently as quality issues re-emerged on the 737 MAX and 787. The company has been in a terrible position since the MAX debacle, with the global pandemic, 787 quality issues, and an additional 737 MAX quality issues. Things have been so bad under the current leadership that there is almost no where to go but up.Let’s compare Boeing’s deliveries over the last three years by model and compare it with their order book. We’ve used Boeing orders without ASC606 adjustments, as that is more apples-to-apples in comparison to Airbus, which has no similar regulatory requirement. Our data have not as yet been updated for Dubai Air Show orders and were through the latest full month data at our writing. In looking at concentration, we’ve examined the change between past deliveries and future orders to determine whether concentration could be projected to increase or decrease in future years. Our trend line is classified as positive or negative accordingly.BoeingConcentration by ModelExamining the concentration by model, recent deliveries show a dependence on the 737-8 (including 737-8-200). The base MAX model accounted for 65.3% of recent deliveries. However, if we move to future orders, Boeing’s dependence on the 737-8 will lessen as the 737-7, 737-10, and 777-8 and 777-9 are certified. That will reduce risks for Boeing as orders will be spread across a broader product line. The following table compares the concentration by model from deliveries from 2021 through September 2023 with the concentration by model in firm orders through September 2023. While Boeing will still depend on 737-8 models, their risk will come down from about 2/3rds of deliveries to just over half of future orders. [caption id="attachment_79235" align="aligncenter" width="640"] AirInsight analysis of Boeing data[/caption] The following chart compares the concentration by model based on deliveries from 2021-Q3 2023 and orders as of the end of Q3 2023. Concentration in Customers Examining recent deliveries, the concentration was quite strong in customers. The following table summarizes the company’s dependence on the largest model or customer, followed by the top three, top five, top ten, and top 15 customers. As one can easily see from these results, the future for Boeing looks brighter than the recent past that has been plagued with groundings and quality issues. The renewed acceptance of the MAX is helping to increase the customer base, reducing reliance on key customers like Southwest and Ryanair. [caption id="attachment_79233" align="aligncenter" width="640"] source: AirInsight analysis of Boeing data[/caption] The following chart compares the concentration by customers based on deliveries from 2021-Q3 2023 and orders as of the end of Q3 2023. [caption id="attachment_79241" align="aligncenter" width="640"] #image_title[/caption] AirbusConcentration by ModelWhile Boeing has been decreasing its concentration, Airbus has the pleasant problem of extremely strong demand for its A321neo family. As the most efficient aircraft in its class, this model is building on a strong performance in deliveries over the last three years with strong continuing demand. As a result, Airbus concentration appears to be headed in a different direction, with a very strong A321neo and a customer in Indigo with a very large backlog.On a model basis, Airbus is becoming even more dependent on the A321neo, as shown in the following table comparing concentration by model from deliveries over the last three years to backlog as of the end of the last reporting month. [caption id="attachment_79236" align="aligncenter" width="640"] AirInsight analysis of Airbus data[/caption] The following chart compares the concentration by model based on deliveries from 2021-3Q23 and orders as of the end of Q3 2023. Concentration by CustomerSimilarly, with exceptionally large orders for narrow-body aircraft, particularly the A321neo, Airbus has generated larger customers that tend to increase concentration. That is reflected in the following chart, which shows the percentage of future backlog by customer size. The very large record order from Indigo, now Airbus largest customer in terms of backlog, skews the results. Nonetheless, Airbus has a significant risk with several very large A321 orders. [caption id="attachment_79237" align="aligncenter" width="640"] AiInsight analysis of Airbus data[/caption] The following chart compares the concentration by customer based on deliveries from 2021-3Q23 and orders as of the end of Q323. The Bottom LineTo answer the title question, Boeing’s risk profile appears to be improving. But the company will need to execute its strategy properly, something it has yet to accomplish under Dave Calhoun’s leadership. Bringing on the 737-7, 737-10, 777-8, and 777-9 will help Boeing reduce its dependence on the 737-8, reducing overall risk. But the certification process remains to be completed for all four models, as the FAA closely examines every detail after the MAX debacle in which Boeing hid a single point of failure.The increasing popularity of the 737 MAX is also distributing the backlog over a more extensive customer base, reducing the risk to key customers like Southwest, United, and Ryanair. Boeing’s concentration risk by model and customer is also improving positively when we look at orders. However, Boeing must still demonstrate that it can execute and build aircraft without quality problems.Airbus, by contrast, has grown its A321neo order book significantly, including additional sales to its largest current customer, Indigo. As a result, the concentration at Airbus is increasing slightly, with a trend towards increasing concentration. Airbus remains the clear leader in narrow-bodies, in a virtual tie in passenger wide-bodies, but well behind in the wide-body freighter market. Airbus has built a substantial market share lead in future orders and is well-positioned to win the delivery battles with Boeing for the next decade. However, its reliance on a couple of models indicates that it may be time to consider new alternatives, such as the A220-500, to strengthen its product line and distribute sales over a larger aircraft model and customer base. Airbus also needs a significant push in the freighter market, which Boeing controls with a 90% market share. Competitive balance changes over long periods. The last decade brought in the rise of Airbus with the success of the neo family and the A350XWB. The next decade will bring fundamental technological change if the industry is to meet its sustainability objectives. The next generation of aircraft will determine the duration of the Airbus market share advantage. Boeing needs to play leapfrog with a new model. But with an attitude of “no more moonshots,” the likelihood of Boeing executing well on a new program that changes the basis of competition is low probability.

US Flight Planner - US DoT On-Time Data	Airbus vs Boeing - Official OEM Data
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