Insight – Post Farnborough perspective on Orders

Farnborough was a marvelous show for Boeing. It was a great comeback after several years of no airshows and, of course, restricted MAX deliveries. Here is a post-Farnborough perspective on orders. We are seeing pent-up travel demand explode with all kinds of trickle-down trouble which is essentially, too few people in the industry to handle this flood of traffic. Who to blame? Everyone in the industry - airlines who saw the forward bookings and didn't hire up fast enough and airports for much the same thing (even if they say they weren't informed of booking levels). This makes the demand for new aircraft timing at Farnborough on point and Boeing gets to bask in the sunshine. However, there is a very important perspective to consider - orders are great but deliveries are where the proverbial rubber hits the tarmac. There are always orders. Not every order turns out to be real as we have seen time after time: Kingfisher (remember them?), Qatar's neos, Emirates A380s, Primera neos, and the list goes on. What really matters is deliveries. A delivery means a full payment, it means an asset that will be put to work. Orders are theoretical while deliveries are real. Of course, most orders become deliveries, but it is never 100%. Let's look at 2022 commercial deliveries for Airbus and Boeing through July 26 of this year. This excludes government/military and business jets. Airbus is quite far ahead of Boeing YTD. Boeing's MAX delivery recovery is in full swing but the 787 delivery situation holds back its volume. Boeing's high delivery rates for the MAX include previous production now being delivered. The Renton plant is now at 31/month and the YTD average monthly delivery rate is 34. We've said it before and it bears repeating. Look at the difference between what Airbus delivers and what Boeing delivers. Close to 64% of Boeing deliveries are MAX 8s and if we add the MAX -200 to that we have 74%. At Airbus, nearly half their deliveries are the A321NX. Not only are deliveries more important, but what is being delivered is very important. Boeing has an advantage in the freighter business and it shows how much this is helping them this year. Derivatives of the 767 going to the USAF aren't listed but are also very helpful. Airbus is way behind in the freighter business. While its military tanker business does quite well it does not have a customer of the size of the USAF. However, Boeing is delivering commercial aircraft that are generally smaller than those being delivered by Airbus. Specifically, the MAX 8 is #1 at Boeing while the A321NX is #1 at Airbus. The MAX 8-200 offers similar seating to the A321NX but cannot be compared to it as it serves a different market. The MAX 9 is a better size compared to the A321NX, but market interest isn't comparable. There is almost certainly an advantage to Airbus being able to charge more for an A321NX than Boeing gets for the MAX 8 or MAX 9. Moreover, Airbus also is delivering the A220 at volumes similar to the MAX 8-200 and MAX 9. But Boeing does not have a delivery in the same category yet. And not to ignore the A320neo which competes directly with the MAX 8. While Boeing delivers 26 MAX 8s per month compared to 15 A320neos per month, Airbus' focus seems to be on the larger and more profitable A321NXand its growing family. In summary, Boeing did have a great Farnborough and handily beat Airbus in orders at the show. But shows and orders should not be the primary focus for industry observers.

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