Can Boeing Close the Backlog Gap with Airbus?

The Backlog Gap between Airbus and Boeing remains quite substantial in the third quarter of 2021, with Airbus having amassed a substantial lead. This will likely translate into higher volumes and higher earnings for Airbus until the next generation of aircraft is introduced in the 2030 time frame. The following chart summarizes the backlog for each company quite succinctly: Airbus leads with a narrow-body backlog of 6,100 to 3,314 after accounting adjustments for doubtful orders at Boeing, providing a substantial backlog gap. Boeing has a lead in wide-body orders, 827 to 773 for Airbus, buoyed by 104 orders for 767 freighters and military tankers. On a passenger aircraft basis, Airbus has also taken the lead in wide-body aircraft from Boeing, which held that position for four decades. Let’s look more closely at why the lead has expanded to a 62.4 % to 37.6% advantage in overall future deliveries for Airbus, with the narrow-body backlog being even more skewed in Airbus favor at 64.8% to 35.2%. Anything less than 40% should set off a panic in the boardroom at Boeing given what that means to revenues and balance of trade. In the narrow-body market, Airbus exploited Boeing’s lack of investment in a 757 replacement or NMA aircraft with its A321neo, which is now offered in several variants with additional fuel tanks to provide trans-Atlantic capabilities. Boeing stuck with the 737 MAX as a competitor to the A321, and quite frankly, it simply doesn’t match up in terms of range or runway performance capabilities. Even prior to the MAX crisis, the -9 and -10 models were not selling particularly well, with the A321 amassing a 4:1 lead in the backlog that has now grown to a 5:1. Of course, the MAX crisis, which resulted in more than 1,000 order cancellations after two fatal crashes dramatically impacted Boeing’s current and future financial performance, further opening the backlog gap. In the wide-body market, Boeing holds a slim backlog market share lead of 51.7% to 48.3%, including freighters and special mission aircraft. Boeing over the last two decades has dominated the freighter market, with nearly 90% of the freighter market from the duopoly. Airbus, however, is now planning to address its relative weakness with a new A350 freighter and is ramping up passenger to freighter conversions for older A321s. Examining the competitive dynamics on an aircraft by aircraft basis, the competitive dynamics switched in favor of Airbus. In the 100-150 seat range, the A220 has no real competition from Boeing. The MAX 7 is a market failure, albeit Southwest as the largest 737 customer, will take some from smaller routes as it maintains its single-type fleet. For other customers, however, the economic advantages of the lighter and more fuel-efficient A220 are substantial enough to even offset the cost of a secondary fleet, adding to the backlog gap. The 150-175 seat segment is relatively equal, with the 737 MAX 8 and A320neo competitive. The MAX 8 (162 two-class seats) is slightly larger than the A320 (150 two-class seats) and has the best economics of the MAX series. The larger MAX 9 and forthcoming MAX 10 models are not as competitive with the A321neo series, which provide both better economics as well as more flexible range and runway performance capabilities. The A321neo has exploited a gap in Boeing’s product line-up that emerged when the 757 ceased production and has effectively become the replacement aircraft for the hundreds of 757-200s operated by major US carriers. American and Delta operate the A321 and 757, and all are replacing older 757s with A321neos. United has ordered the A321neo. Not replacing the 757 in the market was a strategic mistake for Boeing that appears to be too late to correct. On the wide-body side, both the 747-8 and A380 are finishing the remaining order book, with their lines closing. The era of the four-engined wide-body is over. In the twin-aisle segment, Airbus is competing well with the A330neo and A350 against the 787 family. The A330neo competes with the 787-8 and 787-9, but at a lower price point for carriers not seeking the latest high technology long-range widebodies. The A350-900 competes with the 787-9 and the 787-10. While Boeing has an overall advantage in 787s in operation, since the entry into service of the A350, sales of the two aircraft have been virtually identical, with a slight edge over Airbus. The A350-1000 has done well to win an order from Qantas for its planned non-stop service between Australia and the UK and New York. Boeing's 777-X did not make the cut, perhaps because the A350-1000 is flying and the 777-X has been delayed for the third time. At the top end of the market, Boeing’s 777-X family, a re-engined and stretched 777, had limited market success prior to the pandemic, which has virtually eliminated orders for wide-body aircraft as international routes have been shut down. As a result, the backlog for the aircraft has not expanded and is dependent on continued demand from the three big Middle East carriers, Emirates, Etihad, and Qatar. While we believe the aircraft will eventually be modestly successful, it will not reach the sales levels of its predecessor. The market has shifted away from larger aircraft, and the 777-9 has capacity equal to that of the 747-8 and has become the largest aircraft on the market. While Boeing will dominate this sector, the question is to what degree has this sector disappeared. The Bottom Line: Airbus has a strong advantage at the small end of the narrow-body market with 100-150 seats, as Boeing’s proposed deal with Embraer did not occur and Boeing lacks an aircraft in that range. Advantage Airbus. In the 150-175 seat market, Boeing’s best-selling aircraft, the MAX 8, may soon be challenged by an A220-500 variant with substantially better economics and environmental performance. Air France is making a strong push for that aircraft, and Delta is rumored to follow suit. As we expect any airline with a large aging fleet of 737s and A320s to follow. At best, given the MAX issues, it is a draw with the A320neo, but an A220-500 would push the advantage to Airbus. Watch for an announcement in the coming year. In the 175-220 seat market the A321neo and its LR and XLR variants have a substantial advantage over the MAX 9 and MAX 10. The stretched MAX models have reached design limitations that will not enable strong market success with other than existing MAX operators. Advantage: Airbus The 220-250 seat market has limited competition in the Middle of the Market from Boeing with the 787-8, and the NMA is needed. But it is already too late, as Airbus has taken virtually all of the 757-replacement market with the three US majors, American, Delta, and United. Boeing waited too long and lost the segment it initially developed to Airbus. Advantage: Airbus The small to medium wide-body space is a strong competition between the 787 and the A330neo and A350. Since both have entered service, the order book has been fairly equal, but Boeing has an advantage in that the 787 entered service before the A330neo and A350 in total deliveries. Nonetheless, looking forward, it is virtually a dead heat between these models. For shorter-range operations than ultra-long-haul models, Airbus offers the A330neo, which is beginning to gain some market momentum. Airbus can price these models lower than the 787 to airlines that don’t require the ultra-long-range of the 787. Airbus can also use the 253 seat A330-800 to provide a twin-aisle middle-of-the-market competitor with reasonable economics at a low price. This aircraft also has very good range capabilities. Advantage: Airbus At the top of the market, Airbus offers the A350-1000 to compete with the 777X. While this segment has been badly hurt by the pandemic and delays to the 777X program, we still expect a modicum of success, but not to the extent of the original 777 program. While Airbus has seen several successful campaigns with its A350-1000, it has not been a resounding success, reflecting current airline attitudes about larger aircraft. Advantage: Boeing Given the current lineup, it appears Airbus will maintain its advantage until the next generation of aircraft is developed, likely with new technology propulsion and perhaps even elements of hybrid design. But for the foreseeable future, Airbus' backlog gap over Boeing looks to remain strong.

US Flight Planner	Airbus vs Boeing
US Airline Schedule Performance	Daily Production & Deliveries

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