Airbus and Boeing O&D through July

Let's start with the chart. Bloomberg offers this analysis of the latest numbers from Boeing. Yes, Boeing is struggling with the supply chain and so is Airbus which delivered 65 single-aisle aircraft in July. How did Airbus do so much better? We believe the reason its deliveries is higher based on previously parked "gliders" getting engines. Airbus did not deliver all of those as new off the line. Earlier this year Airbus had about 100 "gliders" waiting for engines. Engine OEMs are trying hard to catch up. The chart shows that Airbus has fallen behind Boeing in the order race. Both OEMs will be updating their numbers as the Farnborough deals get firmed and deposits hit their bank accounts. Several people missed this when castigating Airbus for only reporting eight firm orders from the show. This is not a fair reflection on Airbus which is unable to control customer financial planning. Airbus had a good show with over 900 orders, so we can expect the order chart to rise considerably. But we do not expect to see Airbus catch up to Boeing this year. In terms of twin-aisle aircraft, Airbus' A350 is the key product and at Boeing, it is the 787-9. The A350 sold twice as many as A330s, and the 787-9 sold three times as many as the 787-8. Back to deliveries. Both OEMs have their supply chains straining. There is no margin for delays and any hiccup creates a glider. Gliders do not bring in cash, so the incentive to get the delivery made is significant for everyone in the supply chain. Many companies in the supply chain are struggling with the capital outlays and waiting for the payments. What does not get much mention is the shortage of engineers and mechanics to get these gliders completed. Neither OEM dares to move any staff from their FALs to sort out the parked aircraft. Other people have to be brought in to do this. It is complicated and expensive. These days it is no longer reported, but the same problem occurred at Bombardier with the C Series. Our sense is that the rate increase steps envisaged by both OEMs may need to be slowed down. Its true the market demand for new aircraft is there, but the system to get these out of the FALs into customers hands is running into several bottlenecks. Given the 100% focus on safety, no OEM will compromise the quality of their products. This means the people brought into the final production and delivery process must operate at OEM standards. Consequently, we do not expect a quick improvement in delivery speeds. In summary, we need to focus more on the production and delivery race than the order race.

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