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The return of the Boeing 737 MAX is approaching as Airbus reports the highest delivery figures since before the pandemic, delivers the first A330-800 and evaluates the A320 fare increase.
by J. Kasper Oestergaard, European correspondent for Forecast International.
On October 29, Kuwait Airways, the national airline of Kuwait, received its first two A330neo. These aircraft are the first of eight A330neos ordered by the airline. The event also marked the first delivery of Airbus’ A330-800. Photo source: Airbus SAS
Boeing and Airbus delivered 13 and 72 commercial aircraft in October 2020, compared with 19 and 76 deliveries, respectively, in the same month last year. For Airbus, the month of October was the strongest since the COVID-19 pandemic began. With just 111 deliveries this year to date, Boeing is 210 shipments behind last year’s total for the first 10 months of the year. Airbus delivered a total of 413 jets from January to October, compared to 647 during the same period last year. Boeing deliveries have suffered for many months as a result of two 737 MAX accidents and the subsequent suspension of deliveries and grounding of the fleet. Deliveries of 737 MAX aircraft have been on hold since March 2019. Due to COVID-19, both manufacturers were forced to temporarily shut down production facilities and also laid off thousands of employees and announced significant production rate cuts in most programs. For all of 2019, Boeing delivered 380 aircraft, while Airbus set a new all-time annual record, delivering 863 aircraft. Prior to this, Boeing had maintained the lead in deliveries over Airbus since 2012. In 2018, Boeing delivered 806 aircraft (763 in 2017), and Airbus delivered 800 (718 in 2017).
In October, Boeing’s 13 aircraft shipments included one 737NG, one 747-8, three 767s, four 777s, and four 787s. Production of the 737 MAX was suspended from January this year until the end of May, when Boeing announced that it had Low speed production of the aircraft started. Boeing expects the 737 MAX production rate to gradually increase to 31 per month in early 2022, with further increases as market demand allows. Boeing has also announced that the 787 production rate will be reduced from 14 per month (rate at the beginning of the year) to just six per month during 2021. On October 1, Boeing announced that it will move all 787 production to South Carolina. in mid-2021. The combined 777 / 777X production rate will be reduced to 2 per month in 2021. The production rate assumptions have not changed for the 747 and 767 programs. Prior to the suspension of production of the 737 MAX, Boeing was building the plane at a reduced rate of 42 per month. The company has built around 450 737 MAX aircraft during grounding and is targeting delivery of more than half of them in the first 12 months after recertification. While the US Federal Aviation Administration (FAA) has repeatedly stated that it does not have a timetable for the aircraft’s return to service, the 737 MAX was expected to remain on the ground at least until November. In any case, it will be several years before Boeing can reach the originally planned monthly production rate of 57 aircraft. Prior to the suspension of deliveries in March 2019, Boeing had produced and shipped 387 737 MAX aircraft.
According to statements made by Patrick Ky, executive director of the European Union Aviation Safety Agency (EASA), the 737 MAX could receive regulatory approval to fly again in November and return to service by the end of the year. On October 6, the FAA released the draft Flight Standardization Board (FSB) report on proposed pilot training for the 737 MAX, incorporating the recommendations of the Joint Operations Evaluation Board (JOEB). Several key milestones remain: Final design documentation and the report of the Technical Advisory Board (TAB), the issuance of a Notice of Continuation of Airworthiness to the International Community (CANIC) and AD, the termination of the Ground Connection Order by part of the FAA and the issuance by the FAA of certificates of airworthiness and export certificates, and review and approval of operator training programs. On November 10, Reuters reported that the FAA was in the final stages of reviewing the proposed changes to the 737 MAX and was expected to complete the process shortly.
In October, Airbus delivered 72 aircraft, including 12 A220, 43 A320 (2 CEO / 41 NEO), four A330, 12 A350 and one A380. For the full year 2019, Airbus delivered 642 A320 family aircraft, of which 551 were NEOs, and also delivered a record 112 A350s. Prior to the COVID-19 pandemic, Airbus was targeting an A320 fare increase of 5 percent to 63 aircraft per month starting in 2021, and was also discussing further acceleration with its supply chain that could have raised the production rate up to as high as 67 aircraft per month, or 804 per year, by 2023. This would have put the company within reach of a total of 1,000 aircraft deliveries per year. These plans have now been shelved. Due to COVID-19, Airbus has cut production on several programs and is looking to keep underlying aircraft production 40 perent below pre-pandemic plans for two years. The A320 production rate has been reduced to 40 aircraft per month, compared to an average of more than 53 aircraft per month in 2019. However, recently, Airbus confirmed that the company is considering an increase to 47 A320neo aircraft per month in the second half of 2021. The A330 and A350 programs have been reduced at a rate of two and six aircraft per month, respectively. No fare cuts have been announced for the A220 or A380.
As for the order rush, in October Boeing booked no new orders, but reported 12 cancellations of the 737 MAX. So far this year, Boeing has accumulated 67 gross orders (460 cancellations => -393 net new orders). For the full year 2019, Boeing booked 243 gross orders (330 cancellations => -87 net new orders). For the full year 2018, Boeing recorded 893 net new orders and 1,008 gross orders.
In October, Airbus reported orders for 11 aircraft, as well as three A220 cancellations. The orders included two A220-100s for Comlux, four A220-100s and one A320neo for a private customer, two A320neos for Skyserv and two A321neos for an undisclosed customer. For 2020 to date, Airbus has accumulated 381 gross orders (73 cancellations => net of 308). For the full year 2019, Airbus obtained 1,131 gross orders (363 cancellations => net of 768), thus recovering the crown of orders from Boeing. In 2018, Airbus posted a total of 747 net new orders and 831 gross orders, thus losing the 2018 order race. Prior to this, Airbus had maintained an ordering advantage over its rival every year since 2012.
At the end of October, Airbus reported a backlog of 7,377 aircraft, of which 6,564, or 88 percent, were narrow bodies of the A220 and A320ceo / neo family. This is 348 aircraft short of the company’s all-time order book record of 7,725 aircraft set in January 2020. As of the end of October 2020, Boeing’s delay (total unfilled orders prior to the ASC 606 adjustment ) was 5,121 aircraft, of which 4,160, or 81 percent, were 737 NG / MAX narrow-body jets. The all-time high for Boeing’s order book of 5,964 aircraft was set in August 2018. The number of Airbus aircraft to be built and delivered represents 8.6 years of shipments at the 2019 production level. By comparison, the backlog of Boeing orders would “only” last 6.4 years at the 2018 level, which we use as a proxy for 2019 due to the sharp drop in 737 MAX deliveries. So far this year, Boeing’s book-to-invoice ratio, calculated as net new orders divided by deliveries, is negative because cancellations exceed gross orders. Airbus’ book-invoice ratio is 0.75. In 2019, Boeing’s book-invoice ratio was negative, while Airbus reported a book-invoice of 0.89.
Results for the third quarter of 2020
As expected, Airbus and Boeing’s third-quarter earnings reports were a gloomy reading, however, with some signs of improvement. Boeing reported third-quarter revenue of $ 14.1 billion, compared to $ 20.0 billion in the same quarter last year. During the same period, Boeing’s net loss was $ 466 million, compared to a profit of $ 1.2 billion last year. Boeing’s free cash flow (FCF) was $ -5.1 billion in the third quarter. Revenue from the commercial aircraft segment declined 56 percent to $ 3.6 billion in the third quarter.
Airbus Group reported third-quarter revenue of EUR11.2 billion compared to $ 15.3 billion in the same quarter last year. Airbus lost 767 million euros during the third quarter (989 million in profit in the third quarter of 2019) and posted a positive free cash flow of 600 million euros. This compares to free cash flow of EUR-12.9 billion for the first six months of 2020, a major improvement. In the third quarter, Airbus (commercial aircraft) revenue fell 33% to € 7.7 billion.
Forecast 2020
Forecast International’s Platinum Forecast System® is a breakthrough in forecasting technology that, among many other features, provides 15-year production forecasts. The author has used the Platinum Forecast System® to retrieve the latest delivery forecasts and, by 2020, Forecast International analysts currently expect Boeing and Airbus to deliver 219 and 513 commercial aircraft, respectively.
Note: The 777-300ER order book includes a 777-200LR.
References:
International Forecast Civil aircraft forecast covers the rivalry between Airbus and Boeing in the large aircraft sector; the emergence of new players in the regional aircraft segment seeking to compete with Bombardier, Embraer and ATR; and the changing dynamics within the commercial jet market as aircraft such as the Bombardier Global 7000, Cessna Hemisphere and Gulfstream G600 enter service. Also detailed in this service are the various market factors driving the general aviation / utility segment, as Textron Aviation, Cirrus, Diamond, Piper and many others battle for sales and market share. An annual subscription includes 75 individual reports, most with a 10-year unit production forecast. Pricing starts at $ 2,295, with discounted full library subscriptions available. Click here for more information.
Joakim Kasper Oestergaard, based in Denmark, is the Forecast International company AeroWeb Y PowerWeb European webmaster and editor. In 2008, he came up with the idea for what would eventually become AeroWeb. Mr. Oestergaard is an expert in defense and aerospace market intelligence, civil aviation fuel efficiency, defense spending, and defense programs. It has an affiliation with Terma Aerostructures A / S in Denmark, a leading manufacturer of composite and metallic aerostructures for the F-35 Lightning II. Mr. Oestergaard holds a Master of Finance and International Business from Aarhus Business School – Aarhus University in Denmark.
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