Boeing recently provided its order and delivery numbers for June. We analyzed those numbers and observed that order intake stabilized while deliveries increased. The release of the June report also marks the end of the first half of 2020 for Boeing and has been one that will likely be remembered.
Source: Motors Actu
In this review, we zoomed in a bit to see how the first half of 2020 compares to last year. As it gives a good idea of where the differences have been made this year and last year. We’ll do that for the order side of the equation, but also for deliveries and dig a little deeper into the values and details of the program. This should give you an idea of the severity of the current crisis and how that is already affecting aircraft manufacturers like Boeing, while the coming months will also be extremely challenging.
Boeing: very low orders
Figure 1: Summary of Boeing H1 2020 orders and deliveries (Source: AeroAnalysis)
For this analysis, we used the newly developed Boeing KPI monitor that we made available to Aerospace Forum subscribers. It is full of information, so we will review and expand where necessary. Year-over-year changes can be roughly divided into an order component and a delivery component.
First we look at the order component, which includes not only order entries, but also cancellations. The gross orders column shows us that Boeing recorded an order flow of 59 units. At the same time, we see that in six months, Boeing was unable to register orders for two months and reserved fewer than 10 orders in another two months. In February and March, we saw COVID-19 spread faster, but we cannot say that it led to a large decrease in order activity. Just from the sentiment, you would think that the order intake was much lower due to COVID-19. However, in the first quarter, gross order intake decreased 46 units year-over-year and in the second quarter this was just three units. The likely explanation for this is that the second part of Boeing’s 737 MAX crisis started in March 2019, causing the company to be unable to end sales last year. Therefore, the second quarter order intake does not show a big change year after year and the first half of the year shows “only” 49 fewer orders, this is largely a reflection of the Boeing 737 MAX crisis hitting Boeing. In 2019, orders were already sold out, and with the exception of extensive body sales, there wasn’t much to get orders and even that has been under pressure now. Boeing couldn’t be much worse than last year and that’s what the gross numbers show.
While Airbus (EASDF) builds on its annual order growth in a strong month of January, Boeing may attribute lower orders to a weak January of this year. Last year, in January, Boeing was able to obtain 29 orders for the Boeing P-8, as well as orders for the Boeing 787 and Boeing 737 MAX. Those orders were absent this year.
Source: Boeing
Therefore, gross orders don’t really show the pain of the pandemic because Boeing was already dealing with a crisis last year that was preventing it from finalizing sales. Where the pain really becomes visible is the cancellations. Boeing has long been able to limit the emissary of the order book. However, we are now seeing that in February the cancellations started to recover quite a bit. January showed no cancellations, but in the other months Boeing processed cancellations each month, and each month those cancellations were higher than in the same month less year. Surprise? Not really.
Here some things come together. 98% of the cancellations were for the Boeing 737 MAX. Obviously, the Boeing 737 MAX crisis plays a role here. In late March, delivery delays began to exceed 12 months and the MAX is not expected to return until the end of 2020 … far more than what Boeing anticipated before and what it said to its customers. Depending on how strong an airline’s position is, customers activated clauses that allowed them to walk away from their order. In addition to that, Boeing admitted the need of additional pilot simulator training that completely changes the value proposition of the product that the airlines signed, or in other words “the product that the airlines and lessors signed years ago is not the product as we know it today.” On top of that came the pandemic that made the emissary worse in the order book. For this year and possibly beyond that, the demand for new aircraft simply doesn’t exist and that’s where the Boeing 737 MAX becomes its own victim, as the pandemic has made the Boeing 737 MAX an even weaker player in the market, allowing customers who were already doubting their orders to move away from their orders entirely or at least streamline the order book for a changed growth profile in the market.
Combining gross orders and cancellations, we see net orders at -323 units, 344 units lower compared to last year. This is mainly due to lower gross orders of 15% and 85% of low cancellations. So obviously, the pressure of the crisis facing Boeing is reflected more in cancellation numbers than in gross order intake. The net value of the order stood at – $ 12 billion for the first half of 2020, marking a $ 22.2 billion turn in the negative direction.
According to the program, the deterioration was driven by the Boeing 737 MAX by 90% and 10% by the Boeing 787 and the Boeing 777. That really shows the challenges that Boeing faces as these platforms form the core of the product portfolio. of Boeing commercial aircraft.
Boeing: drop deliveries
Source: Aviation Week
Where the pain really shows is at the level of surrender. Boeing saw declines in deliveries each and every month of the year. In the first three months of last year, Boeing still had a delivery stream for Boeing 737 MAX and Boeing 737 Next Generation. With the grounding of the MAX, those deliveries remained absent this year, while the Boeing 737 Next Generation commercial aircraft portfolio has been depleted. The temporary closure of some widebody assembly lines also led to lower first-quarter deliveries, while Boeing 777 deliveries were already expected to drop.
In the second quarter, the declines were more modest as last year the Boeing 737 MAX was also absent from the mix of deliveries in the second quarter, but deliveries decreased 70 units in both directions driven by the Boeing 787 (50%) , Boeing 737 (28%). Boeing 777 (11%), Boeing 767 (8.5%), and Boeing 747 (2.5%).
During the first half, deliveries decreased 169 units or 70%, driven mainly by the Boeing 737 and Boeing 787. If we look at the figures for the year to date, we conclude that the delivery value of $ 10.3B shows a decrease of $ 15.8B in deliveries. .
conclusion
Combining orders and delivery values, we can conclude that year after year, orders fell $ 22B while deliveries fell $ 1B, meaning the combined value shows a year-over-year decrease of 16B. Admittedly, some comments need to be made here to make the numbers more meaningful and those comments are that some military sales derived from commercial aircraft were absent this year and the Boeing 737 MAX crisis that affected Boeing’s delivery flow for three months last year and for the full six months so far this year, while the pandemic led to a decrease in wide body deliveries as well. At the order level, the continued grounding of the Boeing 737 MAX and the pandemic pushed customers to begin canceling Boeing 737 MAX orders for the new normal in the air travel market that customers had over-ordered While the value proposition of the Boeing 737 MAX has changed, making it a primary platform for order cancellation.
So while Airbus saw higher gross orders and lower cancellations, Boeing saw lower gross orders and higher cancellations in the first six months of the year. Where Boeing and Airbus figures are most comparable are deliveries, where Boeing is down 169 units and Airbus is down 193 units. Therefore, suffice it to say that the pandemic is best reflected in delivery figures due to the plant closure, as well as the inability of customers to absorb new aircraft. The cancellations obviously also reflect the pandemic, but with the side note that the new demand profile made the Boeing 737 MAX more prone to cancellation than any other platform.
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Divulge: I am / we are long BA, EADSF. I wrote this article myself and express my own opinions. I receive no compensation for it (other than Seeking Alpha). I have no business relationship with any company whose shares are mentioned in this article.
