Boeing smokes an Airbus at the Farnborough Air Show
The Farnborough Air Show returned last week, marking the biggest event in the aviation industry since the COVID-19 pandemic began. Boeing (BA -2.01%) And the Airbus (Eddy -0.07%) It usually uses the biennial gathering to negotiate and announce major aircraft orders.
Airbus had a quiet week, with few announcements on orders. Meanwhile, Boeing has unveiled more than six deals, including an order for 100,737 MAX 10s from Delta Airlines.
Thanks to this demand momentum, Boeing stock gained 7% last week, beating the market. But while the US airline giant scored an important win at Farnborough, it still faces huge challenges in the commercial aircraft market, mainly due to its narrower, smaller-hulled jet portfolio compared to Airbus.
There are no big spots for an Airbus
Airbus announced three orders last week. First, Delta supplied its A220 order book with 12 additional company orders. Second, easyJet has confirmed orders for 56 aircraft of the A320neo family. Third, LATAM Airlines has ordered an additional 17 A321neos.
Thus, Airbus announced orders for only 85 aircraft during the Farnborough Air Show. In addition, EasyJet announced its request a month ago and was waiting for shareholder approval to confirm it. However, Airbus executives maintained a confident tone, saying they mainly use the air show to talk to suppliers about bottlenecks hampering production rather than focus entirely on registering large new orders from airlines and leasing companies.
Unlike Airbus, the Boeing sales team had a busy week. In addition to a large order from Delta Air Lines, Boeing formally announced a previously unspecified order by Japan’s ANA Holdings Inc. for 20 737 Max aircraft on Monday.
The next day, Boeing announced three orders. Miami-based investment firm 777 Partners, which owns stakes in several low-cost airlines around the world, has placed a firm order for 30 high-density 737 MAX 200 aircraft. aircraft leasing giant AirCap He ordered five more 787-9s. Finally, Aviation Capital Group placed orders for an additional 12 737 MAX 8 aircraft.
Later in the week, Boeing said Qatar Airways had confirmed an order for 25737 Max 10s, finalizing a memorandum of understanding announced in January. It also signed a memorandum of understanding with Azerbaijan Airlines for four 787-8 aircraft and showed that Cargolux had selected the new 777-8 freighter as the ultimate replacement for the 747-400 freighter.
Finally, this activity gave 172 firm orders for the Boeing 172 (including the confirmed Qatar Airways deal), as well as the commitment of four aircraft by Azerbaijan Airlines. That would nearly double the company’s total year-to-date orders, having reported 205 net orders in the first half of 2022.
He won the battle but lost the war
Boeing’s “victory” at Farnborough was an important step in the right direction. However, Airbus posted 259 net flat orders in the first half of the year, outperforming Boeing’s 205. So even after signing more orders last week, Boeing has only modest progress on a year-to-date basis.
Furthermore, Airbus received pledges for a total of 292 aircraft from several large Chinese airlines just a few weeks ago. If confirmed later this year, Boeing will face an uphill battle to maintain its leadership in the order race for 2022.
Importantly, Airbus has thousands more orders backlog than Boeing, with narrow-body aircraft representing the complete contrast. Boeing is nowhere near par with Airbus, and that fact isn’t going to change any time soon.
Boeing’s smallest commercial aircraft, the 737 Max 7, cannot effectively compete against the Airbus A220 family, purpose-built for a market of 100 to 150 seats. Meanwhile, neither the 737 Max 9 nor the 737 Max 10 can match the range and performance of the A321neo (especially its longer range variants).
Even with its market share and production shrinking, Boeing should be able to make good profits over the next few years. However, the company will have to devote many years of free cash flow to fixing its weak balance sheet. Meanwhile, Airbus has a clean balance sheet and is poised for meaningful growth while easing supply chain constraints. This makes Airbus shares a much more attractive investment than Boeing shares.