Boeing Trails Airbus In The Race For New Commercial Airplane Orders
Boeing ( BA ) is trailing its European rival, Airbus, in new commercial airplane orders in the year-to-date period. Through August, Boeing received orders for 786 commercial airplanes compared to 902 received by Airbus.
This order tally is in stark contrast to last year when Boeing with 1,203 commercial airplane orders held a comfortable lead over Airbus's 833 orders. Last year, Boeing's commercial airplane order book was driven by strong order volumes for its newly launched single-aisle Boeing 737MAX. Due to the absence of any major launches in the single-aisle airplane category - which constitutes the largest portion of orders from airlines - Airbus has gained the lead.
In retrospect, Airbus has held a lead over Boeing in new commercial airplane orders for much of the last decade. However, the gap in these orders for Boeing and Airbus has been very narrow, which is indicative of the intense competition that exists between the two players. We currently have a stock price estimate of $98.10 for Boeing , around 10% below its current market price.
Single-Aisle Airplane Segment Drives Order And Delivery Volumes
Single-aisle airplanes, which generally seat between 90 and 230 passengers and fly on short-to-medium range domestic routes, form the bulk of airplane orders from airlines. Of the 786 commercial airplane orders received through August by Boeing, 662 were for single-aisles. In the case of Airbus as well, single-aisle airplanes constituted nearly 88% of all orders in the year-to-date period. Thus, the single-aisle airplane segment plays the most important role in determining who between Boeing and Airbus leads in the race for commercial airplane orders.
In this segment, Boeing's 737 series competes with Airbus' A320 family of airplanes. There exists intense competition between the current generation of these airplanes, and Airbus, due to its first move, has a lead over Boeing in the next-generation of these airplanes. Airbus launched the next-generation of A320 family - A320neo - in 2010, while Boeing launched the next-generation of its 737 series - 737MAX - in late 2011.
As a result, the A320neo is expected to enter service with airlines in 2015 - two years before the 737MAX is expected to make its first delivery. Airbus' capacity to make deliveries of the A320neo a couple of years prior to the 737MAX is weighing in its favor as airlines are eager to induct more fuel-efficient airplanes in their fleet sooner than later in order to expand their margins and also reduce the proportion of fuel costs in their total costs. Both A320neo and 737MAX are 10%-15% more fuel-efficient than their previous generations and also produce much less noise and emissions.
Overall, we figure that due in part to its prior launch, the A320neo family received more orders to drive growth in Airbus' total commercial airplane orders. Through August, the Airbus A320neo family received 2,179 orders, compared to 1,498 orders for Boeing 737MAX series. However, in the long term, when both next-generation airplanes enter service, orders growth will depend on the operational performance and production rates. The latter determines the waiting period for airlines between placing an order and getting the delivery.
Boeing Leads Airbus In Twin-Aisle Airplane Orders
In contrast to the single-aisle airplanes segment, Boeing leads Airbus in orders for twin-aisle airplanes in the year-to-date period. Through August, Boeing received 124 orders for its twin-aisles which include 787Dreamliner and 777. Airbus on the other received 112 orders for its twin-aisles - A330 and A350 - for the same period.
Though lagging in orders, Boeing's production rates are higher as it made 414 commercial airplane deliveries compared to 394 by Airbus in the current year through August. The chart below depicts Boeing's share of global commercial airplane deliveries in the recent past and for the near future.