Boeing Commercial Aircraft is Dependent on a Few Critical Markets

Several media and analysts are digging through the Airbus and Boeing data trying to find nuggets that might give a unique view of the 2018 orders and deliveries. We prefer to examine results over time and develop insights from discernable trends. Examining the results one year at a time does not necessarily provide enough context to draw meaningful conclusions. The following charts are called Starbursts; the inner section is world region, followed by the largest customer country and then largest customer within the region. The charts show the major markets for each of the selected years. The first chart shows what Boeing’s deliveries looked like by market in 2000. There were 492 deliveries. The dominance of North America is quite clear. Delta was the biggest customer. Europe came next, with the UK and BA being the largest customers. Then came East Asia, with China being the largest country but the largest regional customer was Korean. In 2005 there was a large decline in deliveries to 290. The US still dominated and ILFC was the largest customer. East Asia had trumped the EU as the next region, and China was the largest customer country while JAL was the largest airline customer. Note that Boeing defines Asia in several micro-markets. Taiwan forms part of what Boeing calls Southeast Asia and China Airlines was the largest customer there. Adding these micro-markets, Asia's numbers would show much more impressive growth from 2000. Ryanair took the top slot in Europe which meant Ireland squeezed out the UK. Oceania came next, then Africa and finally Central America and Mexico. By 2010 deliveries were back to more robust levels. The USA was still in the lead but by much less. American was the top customer. Next came Europe, which thanks to Ryanair had pushed East Asia back to third place. In East Asia saw China as again the largest customer country but it was the two big Japanese airlines that were the biggest customers. Note Southeast Asia comes next - if combined with East Asia these two would have been larger than the EU. For the first time, the Middle East pops up because of the growth in the UAE, with Qatar the top airline. By 2015 the market had grown by 65% to 762 deliveries. The USA was still the largest market overall, but that is because Boeing uses micro-markets for Asia. United was the largest US customer. In Europe, Ryanair kept its top slot. In East Asia, we see that China Eastern was the top customer. In Southeast Asia, Lion was the top customer. The Middle East rose to a greater level with the growth at Emirates. Note also the growth at Ethiopian moving Africa into the identified markets. The white section is "Unidentified". In 2018 the market had grown another 6% to 806 deliveries. The US was still the largest market and the top customer was Southwest Airlines (the name being too long to fit in the narrow band). East Asia moved ahead of Europe, with China establishing itself as the key country and China Eastern being the top customer. In Southeast Asia, BOC in Singapore was the top customer. In Europe, Ryanair held the pattern from earlier years. The Middle East came next with Etihad being the top customer. This likely to change in future as Etihad shrinks. Ethiopian's growth kept it in the identified markets. The period from 2000 to 2018 also provides an opportunity to see how concentrated Boeing's deliveries have been. The following chart illustrates the number of deliveries and the number of customers taking those deliveries. As new airlines entered the industry there has been a steady growth in customers pacing deliveries. When the customer line dips this indicates Boeing depending on fewer customers. Monitoring the trend of actual deliveries by key markets over the period, we get this chart. The steady growth in Asia is manifest. Next, we look at the models being delivered. Boeing has delivered 9,941 aircraft during the period. Of these, 64% were 737s. The charts show how dependent Boeing has been on the North America and Asian markets with the 737 towering over the other models. Bottom Line Boeing is becoming increasingly dependent on East Asia for a substantial portion of its business. Trade issues with China, which is developing its own narrow-body and wide-body aircraft programs, could provide a serious challenge to Boeing over the next decade, as a reduction of 100-150 aircraft per year headed for the Chinese market would be a significant loss. As globalization changes the nature of the industry, Boeing needs to ensure that it remains a generation ahead of the Chinese. But we are seeing evolution and re-engining, rather than revolutionary new designs coming from Seattle. The handwriting is on the wall. East Asia and South Asia are becoming significant markets as their economies develop a middle class and demand for travel increases at double-digit rates. It won’t take two decades for aircraft demand to exceed that of North America, and that will force Boeing to dramatically change its global sourcing, operations, and profile to remain competitive. Airbus has four narrow-body factories, including one in North America and one in China. Boeing still makes all of its narrow-bodies in Renton, Washington and has a completion center in China. Which company appears better positioned for the future? The answer isn’t Boeing.

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