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, Airbus expects to maintain a book-to-bill ratio of 1. By looking at the orders, we can see a willingness to commit, pricing, product, and availability come 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 Airbus in October. The September report can be read here if you are a PRO subscriber; alternatively, it is freely available to our Premium subscribers.

Order inflow October 2018

Figure 1: Orders Airbus October 2018

During the month of October, the company received a total of 85 orders:

  • Lufthansa (OTCQX:DLAKY) ordered 17 Airbus A320neo aircraft.
  • Farnborough International Airshow order: VietJet ordered 50 Airbus A321neo aircraft.
  • An undisclosed customer ordered 10 Airbus A330-900 aircraft.
  • Kuwait Airways ordered 8 Airbus A330-800, meaning that Airbus has found a customer for the shortest variant of the Airbus A330-800 after losing Hawaiian Airlines as a customer for the -800.

Starting this month, we are also closely tracking customer reveals and cancellations per customer:

  • Chengdu Airlines was disclosed as a customer for 1 Airbus A319ceo.
  • Leasing firm AWAS was disclosed as the customer for 2 Airbus A320ceo aircraft, while China Express Airlines was disclosed as the customer for 1 Airbus A320ceo and Israir canceled 1 unit on order.
  • China Eastern Airlines was disclosed as the customer for 3 Airbus A320neo aircraft while AerCap (AER) and IndiGo converted orders for 8 and 125 Airbus A320neo aircraft to orders for the Airbus A321neo.
  • Sichuan Airlines was disclosed as the customer for 2 Airbus A321ceo aircraft.
  • China Southern Airlines was disclosed as a customer for the Airbus

During the month, we saw a strong uptick in order activity. For now, order inflow for wide-body aircraft is timid. Positives were the Airbus A330neo orders and the VietJet order being finalized. Conversions from AerCap and IndiGo show the continued market appeal of the Airbus A321. We will likely see an order boom in December, but the mix is going to matter most.

So far, order numbers have not been blowing us away, but when comparing the first 10 months this year to last year, we observed that the gross order inflow increased by 53 units and net orders increased by 52 units. Orders definitely are not the correct metric to measure current performance, but with all the negativity surrounding the Airbus A320neo program and slow wide-body sales, you would almost get the impression that the company is getting no orders. The contrary is true; order inflow is tens of units higher year over year. Although we believe Airbus will get some orders in by year-end, we want to see consistency in orders to show that Airbus’s new sales method and strategy are not only compliant but also effective and back on the level where they are supposed to be in combination with a more appreciable order mix.

Last year, Airbus received 24 orders in October, while 7 cancellations were processed. In October 2016, the European jet maker received 19 orders, while 4 aircraft on order were scratched from the order book. Averaging the net orders for the previous two years shows that with 81 net orders, the net order inflow was far above the average of 16 orders observed in October during the previous two years.

For October, the list price of the orders was $13.4B, but after discount, this likely is closer to $5.8B.

Deliveries in October 2018

Figure 2: Deliveries Airbus October 2018

For 2018, Airbus initially set a delivery target of 800 units for native Airbus aircraft and later added 18 Airbus A220 aircraft to the delivery target as the joint venture for the Airbus A220 took effect. In October, Airbus lowered its delivery target from 818 jets to 800 jets, now including 18 Airbus A220 deliveries.

In October, Airbus delivered 81 aircraft, or 10 percent of the aircraft it aims to deliver in 2018:

  • Delivered 2 Airbus A220s.
  • Deliveries for the Airbus A320 families were 19 current engine option aircraft and 48 new engine option aircraft totaling 67 units.
  • Delivered 3 Airbus A330 aircraft, which is slightly lower than the production rate, likely related to the Airbus A330neo being feathered into the production system.
  • Airbus delivered 9 Airbus A350, in line with the production rate of 10 aircraft per month (11-month cycle) that it hit in April on the industry side.
  • There were no Airbus A380 deliveries during the month.

Year over year, Airbus deliveries in the first 10 months increased by 67 units, continuing the trend. The increase can be attributed to backloaded deliveries from the start of the year being delivered in the second half of the year. We believe reaching the lowered target is achievable but still challenging, requiring almost 110 deliveries on average in the coming 2 months.

Airbus A320 program deliveries increased by 18 units in September compared to last year. The positive is that since May, the company has started to deliver more Airbus A320neo aircraft than Airbus A320ceo aircraft. Obviously, the planned deliveries from earlier this year are backloaded, but what should happen in the coming months is a combination of living up to the production rates and the push-out of the backloaded deliveries. That is a challenging task for the remainder of the year. Earlier this year, we expected 95-105 deliveries for the Airbus A350. Based on the current realized figures as well as the ramp-up pattern, we expect 95 deliveries. Year to date, Airbus has delivered 70 Airbus A350 aircraft, which means that Airbus still has some work to do to deliver 25 units. Last year, Airbus delivered 20 Airbus A350s in November and December. If it replicates that performance, the number of deliveries would be 90 units, which would be slightly underwhelming.

Book-to-bill ratio

For 2018, Airbus expects to maintain a book-to-bill ratio of 1. For the company, reaching desired book-to-bill ratios usually doesn’t seem like a big challenge, but there should be more emphasis on capturing more wide-body orders in the mix, especially given the challenges the company is facing with the Airbus A320neo. Looking at the monthly book-to-bill ratios does not say a lot, but you have to start somewhere. In October, Airbus booked 85 gross orders while delivering 81 aircraft, indicating a 1.05 gross book-to-bill ratio. In terms of value, this ratio was 1.13 driven by favorable order mix. For the first 10 months, the gross book-to-bill ratio is .68, and is .79 in terms of value, which is a slight improvement month over month.

Conclusion

In October, Airbus logged 85 orders in its official order and delivery book. We continue to believe the company is saving some of the orders announced at the Farnborough International Airshow for December.

In September, we pointed out that reaching the delivery target is still possible, but even the slightest of delays or new problems on the Airbus A320neo could dent the delivery target significantly. It seems like that is just what happened as A321neo and A330neo delays were reported in October and Airbus ended up lowering the delivery target two weeks later. What still holds is that Airbus needs a perfect end-of-the-year delivery flow to reach its targets. In the final two months of the year, in the absence of any new supply chain issues, we expect backloaded deliveries to be reflected in Airbus single-aisle delivery numbers. A ramp-up in single-aisle deliveries should be visible in the remainder of the year, while we expect the Airbus A350 deliveries to come in at the lower side of our expectations.