Each year, Boeing and Airbus engage in a fierce order battle. In 2017, Airbus won that battle by numbers, but in terms of dollar value, which AeroAnalysis ultimately considers to be more important, Boeing easily outperformed Airbus.
For 2018, Boeing expects order inflow to be moderated. That’s a pretty vague term, but it does not make it less interesting to look at orders and deliveries on a monthly basis to assess the overall appeal of aircraft on the commercial market. By looking at the orders, we can see a combination of willingness to commit, with pricing, product, and availability coming together. Special attention will be paid to the mix of single-aisle aircraft and wide-body aircraft, knowing that a single-aisle aircraft costs roughly half or a third of a wide-body aircraft, depending on the model.
In this report, AeroAnalysis will be having a look at the order inflow and deliveries for Boeing in April 2018. If you have missed the March edition, you can read it here.
During the month of April, Boeing received a total of 78 orders valued $7.8B after discounts:
- American Airlines ordered 25 Boeing 787-9 aircraft.
- Boeing Capital ordered 22 Boeing 787-8 aircraft to be leased to American Airlines.
- UTAir Aviation ordered 30 Boeing 737 MAX aircraft, though we believe this is a conversion from the Boeing 737NG to Boeing 737 MAX.
- Uzbekistan Airways ordered one Boeing 787-8. The order offsets the Royal Jordanian cancellation for the very same airframe.
The order from American Airlines resulted in 60% of the incoming orders being for the Dreamliner. Considering that the other orders are replacements and conversions, the American Airlines order pretty much was the only order during the month.
April was a good month where Boeing booked 78 orders versus the three- and five-year average of 29 and 37 units. In the first four months, Boeing booked 268 net orders vs. 210 net orders last year. So, Boeing is having a strong start of the year and it will be interesting to see how many new orders they will announce during the upcoming Farnborough Airshow.
Deliveries in April
For 2018, Boeing has set a delivery target of 810-815 units. In December 2017, AeroAnalysis set a 2018 delivery target of 816 units at the low end. Boeing is more or less meeting our expectations here.
In April, Boeing delivered 44 aircraft, down 47 units from a month earlier:
- Boeing delivered 34 Boeing 737 aircraft, including 14 of the MAX variant. Deliveries were significantly lower than the production rate after Boeing pushed out most of its aircraft in March to boost Q1 results.
- Boeing 787 deliveries were below the production rate of 12 aircraft per month.
- Boeing 777 deliveries were three-four units lower than what should be expected based on the production rate of 3.5 aircraft per month effective 2018.
- The Boeing 767 and Boeing 747 deliveries are more or less driven by the delivery schedules of airlines during the year than by slot availability. No deliveries took place for the Boeing 747 and one delivery took place for the Boeing 767.
Delivery volume during April was a bit disappointing. The key programs for Boeing, namely the Boeing 737, Boeing 787 and Boeing 777 all showed deliveries below the production rate. The explanation for this is simple: Boeing pushed out a lot of aircraft for delivery in March to bolster its Q1 results and we are now seeing how that impacts the delivery numbers in the subsequent quarter. The lower deliveries could be somewhat indicative of strain on production. We expect that just like last quarter, Boeing will aim to pull the same trick again, having deliveries peak once every three months.
For 2018, Boeing remained somewhat vague on the subject of the book-to-bill ratio, expecting “moderated” order inflow. Obviously, shareholders are hoping to see Boeing having a book-to-bill ratio of 1 or higher for the full year, but AeroAnalysis currently is expecting it to be between .7 and .9. Looking at the monthly book-to-bill ratios does not say a lot, but you have to start somewhere. In April, Boeing booked 78 gross orders while delivering 44 aircraft, indicating a 1.77 book-to-bill ratio driven by disappointing delivery volumes. In terms of value, this ratio was 2.65 reflecting strong order inflow for the Boeing 787 and overall weak delivery values. For the first four months of 2018, the gross book-to-bill is 1.46, so the book-to-bill ratio is at quite a good year for Boeing.
Earlier, we warned that if Boeing’s March figures would not offset low production volume in the first two months of the year, there was a high chance that Boeing might be missing consensus. Boeing did surprise with strong deliveries in March, but as we can see now the price is being paid in April and we expect a pattern similar to the first quarter in the second quarter.
Overall, we do expect that Boeing will be able to meet its delivery target though there likely will be pressure on the delivery schedules of the Boeing 737 and Boeing 787. Looking at orders, Boeing has quite good momentum as it captured some key customers for its aircraft, but the pool is finite, meaning that Boeing is going to depend more and more on repeat orders going forward.