Boeing Launches 737 MAX 10 – Wins Orders Race at Paris Air Show
by J. Kasper Oestergaard, European Correspondent.
Boeing and Airbus delivered 75 and 64 commercial jets in June 2017, respectively, compared to 74 and 64 during the same month last year. This year to date, Boeing has delivered 352 jets (375 by this time last year), while Airbus has delivered 306 (298 in 2016). In 2016, Boeing delivered 748 jets (762 in 2015), in line with company expectations, while Airbus surpassed its delivery target of 650 jets by handing over 688 jets during 2016 (635 in 2015).
In June 2017, Boeing delivered 49 737s (of which four were 737 MAXs), two 767s, 12 777s, and 12 787s. Boeing currently plans to raise its 737 production rate from 42 per month today to 47 in Q3 2017 and 52 during 2018. Boeing’s CEO, Dennis Muilenburg, has announced that demand supports a further increase to 57 737s per month in 2019. This year more than 50 737 MAX jets are expected to come off the production line in Renton, Washington. At the Paris Air Show in June 2017, Boeing launched the 737 MAX 10 variant to take on the Airbus A321neo, which has been outselling the 737 MAX 9. Boeing has already received 361 orders and commitments for the 737 MAX 10. Airbus is ramping up deliveries of its A350 XWB and this, combined with a higher A320 production rate of 46 per month (commenced Q2 2016), means that the company is narrowing the gap in the deliveries race and will likely surpass Boeing by 2019. By mid-2019, Airbus expects to deliver 60 A320 jets per month. In June 2017, Airbus delivered 50 A320s, six A330s, and eight A350s. Airbus expects to deliver 80 A350s in 2017 (50 to go) and more than 100 A350s in 2018, when the production rate will hit 10 per month.
In the orders race, both manufacturers had a solid month, mainly thanks to the Paris Air Show. In Paris, Boeing came out as the winner with 571 net new orders and commitments, ahead of Airbus at 326. In June, Boeing logged 180 gross orders (minus 7 cancellations => net of 173). Boeing’s June orders included a large order for 50 737 MAX narrowbodies for China Aircraft Leasing Group Holdings (CALC), an AerCap order for as many as 30 787-9 Dreamliners, and an order for 20 777X widebody jets. Boeing has landed 381 net new orders this year to date (421 gross orders), compared to 263 net new orders during the first six months of 2016.
Airbus’ order drought finally came to a halt in May. In June, the company logged 130 net new orders (138 gross). GE Capital Aviation Services (GECAS) placed an order for as many as 100 A320neos, while Air Lease Corporation ordered 12 A321neos, followed by Delta with 10 A321ceos. Airbus has landed 203 net new orders this year to date (248 gross orders), compared to 183 net new orders during the first half of 2016.
With the Paris Air Show now concluded, both companies are now ahead of last year’s order tally to date.
Airbus’ order backlog as of June 30, 2017, stands at 6,771 jets (of which 5,583, or 82%, are A320ceo/neo family narrowbodies), ahead of Boeing’s 5,744 (of which 4,478, or 78%, are 737 NG/MAX narrowbody jets). The number of Airbus aircraft to be built and delivered represents an almost 10-year backlog at the 2016 production level. In comparison, Boeing’s backlog would “only” last 7.7 years.
Following a surge in orders in December 2016, Airbus’ backlog set a new record with 6,874 jets on order; however, after a very weak start in the orders race this year, the backlog has been reduced by 103 aircraft. Airbus booked 731 orders in 2016, resulting in a book-to-bill ratio of 1.06. In the first half of 2017, Airbus’ book-to-bill ratio is just 0.66. Boeing’s backlog continues to hover slightly below the peak level of 5,813 jets on order at the end of January 2016. Boeing is now 69 jets off its record backlog. Boeing booked 668 net new orders in 2016, for a book-to-bill ratio of 0.89. This compares to a book-to-bill ratio of 1.08 this year to date. Airbus has retained an order lead over Boeing every year since 2012.
For the full year of 2017, Airbus can be expected to easily surpass 700 deliveries and further narrow the gap in production between the two major plane makers. The author expects Airbus to deliver 710-720 jets during the year. The key for Airbus is to successfully manage the continued ramp-up in production of the A320neo and A350. In January 2017, Boeing set a target of 760-765 deliveries for 2017, but based on previously announced production rates, that figure is conservative. However, following Boeing’s announcement combined with a slow start to 2017, the author has updated and reduced his delivery target for Boeing to between 765 and 775 aircraft. Boeing will see higher deliveries in Q3 and Q4 2017 when the 737 production rate is raised to 47 per month from 42 now. In part, this is offset by fewer 777 shipments. For Boeing, the planned increase in production of the 737 and a smooth transition to the MAX are critical. Backlogs can be expected to decline in 2017 for both companies but, following a better than expected Paris Air Show, the author now expects Boeing to land 600-700 net new orders in 2017 (up from 400-500), with Airbus now at 500-600 orders (400-500 previously). The decline in orders in recent years is mainly due to slower GDP growth and low oil prices. According to both Airbus and Boeing, the demand for passenger aircraft is tied to growth in worldwide revenue passenger miles (RPMs), which again are highly correlated with global GDP growth. While worldwide airline profits peaked in 2016, the International Air Transport Association (IATA) expects profits to fall in 2017 for the first time in six years due to higher oil prices and labor costs, combined with a slow-down in demand. World airline profits are expected to fall 16 percent to $29.8 billion in 2017.
A decline in orders should not be a major source of concern for jet makers. Backlogs are at or near all-time highs and will provide stability and growth for years to come. The main focus for both companies continues to be managing cost and extensive global supply chains. According to Boeing, about 65 percent of the cost of a jet is from the supply chain. It is therefore no surprise that both Airbus and Boeing put immense pressure on their suppliers not only to deliver quality parts on time but also to cut costs.
Please feel free to use this content with Forecast International and analyst attributions, along with a link to the article. Contact Ray Peterson at +1 (203) 426-0800 or via email at ray.peterson@forecast1.com for additional analysis.
The Forecast International Civil Aircraft service covers all facets of the fixed-wing commercial and private aviation industry. It includes more than 70 detailed reports, complete with production forecasts on individual civil aircraft families. Four Market Segment Analyses provide in-depth examination of the markets for Large Commercial Jet Transports, Regional Aircraft, Business Jets, and General Aviation/Utility Aircraft. Included in the reports are production forecasts, a Forecast Rationale detailing the basis for the forecast, the aircraft’s price range and technical specifications, a program history, and recent developments.
References:
http://www.boeing.com/commercial/#/orders-deliveries
http://www.aircraft.airbus.com/market/orders-deliveries/
http://www.reuters.com/article/us-airshow-paris-idUSKBN19D0UQ
http://www.defensesecuritymonitor.com/wordpress/aviation-industry-makes-good-showing-at-paris-2017/
A military history enthusiast, Richard began at Forecast International as editor of the World Weapons Weekly newsletter. As the Internet grew in importance as a research tool, he helped design the company's Forecast Intelligence Center and currently coordinates the EMarket Alert newsletters for clients. Richard also manages social media efforts, including two new blogs: Defense & Security Monitor, covering defense systems and international issues, and Flight Plan, which focuses on commercial aviation and space systems. For over 30 years, Richard has authored the Defense & Aerospace Companies, Volume I (North America) and Volume II (International) services. The two books provide detailed data on major aerospace and defense contractors. He also edits the International Contractors service, a database that tracks all the contractors involved in the programs covered in the FI library. More recently he was appointed Manager, Information Services Group (ISG), a new unit that encompasses developing outbound content for both Forecast International and Military Periscope.
