Boeing's Order Momentum Continued in May




  • In Business/Economy
  • 2018-06-13 13:25:00Z
  • By Adam Levine-Weinberg, The Motley Fool
 

In last year's aircraft order "race," Airbus (NASDAQOTH: EADSY) trailed its U.S. counterpart Boeing (NYSE: BA) for most of the year before overtaking it in December. Even then, it relied heavily on selling ever-more-distant A320neo-family delivery slots, while struggling to sell widebody jets. By contrast, Boeing didn't sell quite as many airplanes in 2017, but it had a more balanced mix of orders for different aircraft types.

Boeing has started strong once again in 2018. Its momentum continued in May, with solid sales of both the 737 MAX narrowbody and its main widebody families. Meanwhile, Airbus is off to another weak start, particularly in the widebody market.

May is another solid month

Through the first four months of 2018, Boeing had captured 268 net orders. This included a key widebody deal with American Airlines, which added 47 more 787 Dreamliners to its order book in April and simultaneously canceled an order for 22 Airbus A350s.

A Dreamliner deal with American Airlines was Boeing's biggest sale of 2018 (so far). Image source: Boeing.

Last month, Boeing received 43 additional firm orders, offset by five cancellations. This brought the company's order total for the year to 306 net firm orders, consisting of 193 737s and 113 widebodies (mainly 787 Dreamliners).

Boeing brought in 15 Dreamliner orders in May, highlighted by six incremental orders from Qantas. Earlier this year, Qantas began its first nonstop route to Europe -- connecting Perth to London -- using Boeing's 787-9. At the time, Qantas' management was already hinting that it was likely to exercise some of its 45 Dreamliner options in the near future, and that's exactly what it did last month.

Boeing also received four orders for current-generation 777s from European airline giant Lufthansa during May. Lufthansa's cargo unit will get two more 777 freighters, and its Swiss International Airlines subsidiary ordered two additional 777-300ERs. These orders are helping to fill out the handful of remaining delivery slots for the current-generation model.

Airbus is still stumbling

For the second consecutive year, Airbus is lagging Boeing dramatically in terms of first-half order activity. It has only 111 net orders year to date -- barely more than a third of Boeing's haul -- and 108 of those are for A320-family planes. Thus, widebody cancellations have nearly equaled new orders this year.

Airbus did start to dig itself out of that hole last month, capturing an order for 15 A350-900s from an undisclosed customer, as well as one for a single A330-200 for a military customer. Nevertheless, both aircraft families are still underwater year to date, with more cancellations than orders in 2018.

Widebody orders have been few and far between for Airbus lately. Image source: Airbus.

The continuing lack of orders for the A330 family is particularly worrisome. Airbus ended May with just 298 net orders for A330-family aircraft. That includes an order for 28 A330neos from Iran Air, which is now effectively dead thanks to the resumption of U.S. sanctions on Iran. Many of the remaining 270 orders are scheduled for delivery far in the future.

As a result, Airbus plans to reduce A330 output to about 60 units in 2018 from 67 units last year, and it announced in April that it will reduce production further in 2019, to around 50 units. But even this modest target could be at risk if order activity remains weak.

Will the Farnborough Airshow be a major catalyst for orders?

While Boeing trounced Airbus in the race for new orders during the first five months of 2018, a lot could change between now and the end of the year. Airbus may look to mount a comeback starting at next month's Farnborough Airshow, the biggest air show of the year.

The biggest air shows are often the venues for major order announcements. However, as overall order activity has slowed over the past few years, there has been more volatility from year to year in terms of how much new business is announced at the air shows.

This year, Boeing will enter the Farnborough Airshow in a position of strength. By contrast, Airbus will face pressure to nab some big deals at the show so it can reinvigorate airlines' interest in its widebody models, particularly the struggling A330 and A330neo.

Adam Levine-Weinberg has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

COMMENTS

More Related News

Caterpillar, Boeing Sell Off After Honeywell
Caterpillar, Boeing Sell Off After Honeywell's Tariff Pessimism

The company's executives are bracing for "hundreds of millions of dollars" in earnings pressure next year from the expanded tariff lists. Caterpillar and Boeing dropped more than 1 percent while the Dow rose 0.5 percent.

Korean Air May Be Giving Boeing a Big Order In the Near Future
Korean Air May Be Giving Boeing a Big Order In the Near Future

Korean Air May Be Giving Boeing a Big Order In the Near Future

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Economy

facebook
Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.