Is Boeing’s Concentration Risk Profile Improving?

Last week, we compared Boeing and Airbus risks concerning concentration in aircraft models and customers based on deliveries over the last three years. But that, analytically, looks backward rather than to the future. Looking at order books is a forward look, and while orders can be changed or canceled, it provides us with better guidance on what the future might look like.  The difference between recent deliveries and future deliveries identifies the direction of the trend in concentration and its associated risks.

Airbus had 8,014 firm orders versus 5,783 for Boeing at the end of September, and there is no question that we’d prefer the larger order book if we had our choice of the two. The A321neo has become Airbus best seller and has essentially taken over the middle of the market that Boeing invented with their 757 and 767 models.  A hot model can increase concentration, particularly if key customers place large orders.

Trends are significant, however, and Boeing’s trend line appears to be improving despite the company’s continuing problems. Of course, Boeing will need to execute well on those future orders, something it hasn’t been able to accomplish recently as quality issues re-emerged on the 737 MAX and 787. The company has been in a terrible position since the MAX debacle, with the global pandemic, 787 quality issues, and an additional 737 MAX quality issues. Things have been so bad under the current leadership that there is almost no where to go but up.

Let’s compare Boeing’s deliveries over the last three years by model and compare it with their order book. We’ve used Boeing orders without ASC606 adjustments, as that is more apples-to-apples in comparison to Airbus, which has no similar regulatory requirement. Our data have not as yet been updated for Dubai Air Show orders and were through the latest full month data at our writing.  In looking at concentration, we’ve examined the change between past deliveries and future orders to determine whether concentration could be projected to increase or decrease in future years. Our trend line is classified as positive or negative accordingly.

Boeing
Concentration by Model
Examining the concentration by model, recent deliveries show a dependence on the 737-8 (including 737-8-200). The base MAX model accounted for 65.3% of recent deliveries. However, if we move to future orders, Boeing’s dependence on the 737-8 will lessen as the 737-7, 737-10, and 777-8 and 777-9 are certified. That will reduce risks for Boeing as orders will be spread across a broader product line. The following table compares the concentration by model from deliveries from 2021 through September 2023 with the concentration by model in firm orders through September 2023.  While Boeing will still depend on 737-8 models, their risk will come down from about 2/3rds of deliveries to just over half of future orders.

The following chart compares the concentration by model based on deliveries from 2021-Q3 2023 and orders as of the end of Q3 2023.