Airbus announced its 1Q15 numbers today and they look weak. Airbus delivered 134 aircraft in the first quarter and took orders for 102 net aircraft, representing a 32 aircraft shrink in backlog. This contrasts with Boeing, which delivered 184 aircraft in the first quarter and received orders for 110 aircraft, a backlog drop of 74 aircraft. Is the order bubble in narrow-body aircraft, just as Boeing and Airbus plan to ramp production rates?
The chart below summarizes the Airbus numbers by aircraft model.
The A319 received no orders again, and Airbus is delivering orders it received some time ago. With only a handful of orders for the A319neo, will Airbus face another potential A340 market misjudgment by going through with production plans for an aircraft with little demand?
Airbus remains highly dependent on the A320 program. About 23% of orders and 47% of deliveries are A320s. Airbus has -5 net orders on the A320ceo but +28 on the A320neo – leading us to believe that customers are switching to the newer model. With the new model entering service later this year, well ahead of the competing Boeing MAX, we would expect to see switching at this point in time to the more fuel-efficient alternative.
Airbus’ A321ceo has a -1 net orders, but +45 orders for the neo – once again we suspect customers are switching. The A321neo order book is a bright spot and the single most-ordered Airbus aircraft during the quarter. The introduction of the A321LR should only improve its position as the closest aircraft to a 757 replacement in the market. With a weak competitive offering in the 737MAX9 from Boeing, we expect the A321neo and A321LR to be best sellers in their category.
The A330-200 program seems stable with orders and deliveries about equal. The A330F program is small potatoes but positive. The A330-300 program received no orders, and 13 were delivered in the period. The A330neo program won some orders, but not as many as we would have expected, given the LOIs from last year that haven’t yet been firmed-up. Perhaps, with a weaker order outlook, these will be held for Paris.
The A350 program once again has seen no orders and only one delivery this quarter. We are concerned at how slowly the A350 deliveries are going, and we understand through industry sources that a supply chain issue has occurred with raw materials. This program should be ramping up production to three per month by the end of this year, and has fallen behind. Airbus has not spoken about this and we wonder why the normally outspoken Akbar Al Baker, Qatar’s CEO, has been so quiet too. It’s not like him.
Finally the A380 program continues its order drought but four were delivered, only about half the rate of 30 per year we were expecting.
The Bottom Line
Airbus remains highly dependent on the smaller aircraft in its portfolio. The twin aisle aircraft obviously are impacted by two new programs; the A350 in production ramp-up, and the A330neo in development. As a result, Airbus does not seem to be getting as much traction as Boeing has for its twin aisles.
Orders for both OEMs are running slower this period than last year, an indication that the industry order bubble may be coming to an end. At the higher end of their portfolio, which typically generate higher margins, Airbus looks vulnerable. One way to demonstrate strength will be a much faster delivery rate on the A350 as the year progresses.
The delivery deficit of 50 aircraft in the first quarter will be difficult to make up, and it appears Boeing has a strong lead in the race for most aircraft delivered in 2015.
Jeez, saying that the numbers look weak is perhaps a little bit of an overstatement, I’m led to believe. The overall market dynamics are very healthy. In the slowest quarter of the year, the Airbus book-to-bill ratio is about 0.8. Since all list prices are inflated every January first, most customers decide on their purchases in December, or if they aren’t in a position to decide they put the decision off by a number of months to gather more information and do more analysis. With Le Bourget coming up in June, and the customary December order bonanza, I believe there’s every reason to believe that Airbus will meet their target of a book-to-bill ratio of one. In terms of deliveries, the supply lines are stable and there are no significant interruptions affecting any program.
Both Airbus and Boeing will likely be able to deliver significant dividends to their shareholders while continue their R&D efforts for at least the upcoming year, if not decade.
“The A319 received no orders again, and Airbus is delivering orders it received some time ago. With only a handful of orders for the A319neo, will Airbus face another potential A340 market misjudgment by going through with production plans for an aircraft with little demand?”
So much bs in this paragraph… How do you dare to compare a plane which is the just the low end of a successful family with a not so succesful family? Even more, the a319 is the basis for the A319CJ. If producing the A3129NEO is a mistake, how would you call the B737-7MAX? The big OEMs just can’t give up so easily on their lower ends.
On the other hand I think the A321NEO EIS should come ahead of the A319
The slowdown in A350 deliveries was expected… The models already in FAL needed modificactions developed during test/certification phase. Airbus has even built temporary stations to offload tasks like cabin fit outside of the main FAL. Later this year, specially from summer onwards, deliveries will start to speed up.
Weak is when looking at the widebodies – not the single aisle.
“On the other hand I think the A321NEO EIS should come ahead of the A319”
Is it be possible that the A319neo’s EIS is (still) planned to be before the A321neo as a pre-emptive strike against the CSeries?
And now that it appears thet the CSeries is (finally) for real, and that the A319neo’s “planned” EIS has done what it could against it, is it possible that Airbus will change plans and give EIS priority to the better-selling A321?
Boeing is killing Airbus in the widebody twin market. Combined 777/787 deliveries were 54 in the first quarter, whereas A330/350 deliveries were only 21. That’s a huge gap. It will take several years for Airbus to ramp up A350 deliveries, but they’re increasing more slowly than they had projected, whereas Boeing is on its production targets for both widebody twins, and will be ramping up 787 production another 40% in the next several years. It remains to be seen whether Boeing can keep 777 production stable prior to introduction of the new models, but right now it’s crushing Airbus in widebody twin deliveries.
I doubt Airbus will change their strategy at this stage of development. But it’s clear that some airliners/lessors would have liked a slightly earlier avaliability of the A321neo rather than the A319neo. More so with all the ongoing debate about the need of a 757 replacement
The A350 captured most of the 777 customers and will be everywhere next year.
The A330 will this year probably do what everybody considered impossible : Beat 787 total sales.
http://www.flightglobal.com/assets/getasset.aspx?itemid=60566
The narrow body race.. IMO everybody can see who’s in the driver seat and an NSA launch is getting closer.
Keep in mind Boeing had a hell of a time with the 787 getting even into production let alone ramp up. Comparatively the A350 is doing very well, but the ramp up is optimistic, it will get there but not fast.
Slow down is due to the fact that some orders are 10 years + out and its the near term we live in. Everyone has to be looking at low fuel prices and long term where they are going.
Airbus obsesses on the A319, they need to let it go, its not their market plain and simple. Stretch the A320, get the A321NEO into operating etc. Sometimes leaders are stupid and this is one stupid spot for them.
A380 should be a concern, its simply not going anywhere. Technically its a fine product for the most part, its just to limited in versatility. A 777 can fly a lot of routes in varying degrees of load, A380 only a few and needs to be well loaded.
Boeing suffered its self-inflicted wounds and is getting over most of them. 777 production will bite eventually (or FedEx gets some incredible freighter deals!) A330 is winding down sooner, so it goes.
The marginal cost of offering the A319neo is tiny, in practice negligible. The variant has no dedicated production facilities or supply chains. Within the neo programme, the marginal cost of certifying the A319neo variant is practically zero as well. The two test flight birds can be sold. All in all, there are no reasons for not offering it. If they sell 100 birds, then each is sold at a profit. Further, offering the A319neo makes the A320-family more attractive as a whole, yielding more sales of A320neo and A321neo; this is an established, well-documented phenomenon in retail and marketing.
One reason the A319neo and 737-7MAX sell poorly is that the resale/lease market is saturated with such-sized inexpensive second hand airframes. In addition, with 6% RPK growth annually, more seats are needed to meet demand in the 2020s relative to the mid-1990s.