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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 is 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, 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 article, AeroAnalysis will be having a look at the order inflow and deliveries for Boeing in January.

Orders in January

During the month of January, Boeing received a total of 28 orders:

  • The US Navy bought 7 P-8 aircraft, which are military derivatives of the Boeing 737-800.
  • The UK bought 3 P-8 aircraft.
  • 1 Boeing BBJ MAX was sold to an unidentified customer.
  • A second unidentified customer ordered 17 Boeing 737 MAX aircraft.

What is worthy to note is that during the month of January, Boeing received 0 wide body orders and 28 single aisle orders. Out of these 28 orders 10 were for military derivatives and 1 was for a business jet. That leaves 17 orders for commercial airlines were it not that there were also 17 cancellations for the Boeing 737. These cancellations are a signal of a customer swap, where one airline drops its order and it is taken up by another airline or lessor. That would mean that net orders during the month were 0 for commercial airlines or lessors.

The 3- and 5-year average order inflows for January are 19 and 19.4 orders. So, order inflow for January 2018 does not seem that bad as the multi-year average show that January tends to be a slow month. However, these multi-year averages do include cancellations. If these cancellations are applied for January 2018, the order inflow was 8 units lower than the multi-year average and what should be pointed out nevertheless is that in previous years there were some wide body orders next to military orders and single aisle orders and those orders do positively impact the order value. Absolutely, the gap is relatively small and there are 11 more months so there certainly is no reason at all to think that this is how the entire year will be.

For January, the list prices of the orders was $3.8B, but after discount this likely is closer to $2.7B.

Deliveries in January

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 my expectations here.

In January, Boeing delivered 44 aircraft:

  • 8 Boeing 787 Dreamliners were delivered, all of which are deliveries of the -9 variant. The delivery volume is 4 units less than the actual average production rate for the aircraft.
  • 3 Boeing 777-300ERs were delivered, which is more or less in line with the production rate of 3.5 aircraft per month effective in 2018 as the Boeing 777X is being feathered into the production system.
  • Boeing delivered 1 Boeing 767F to FedEx and one Boeing 747-8 Freighter to UPS.
  • Deliveries for the Boeing 737 included 2 P-8s, 6 Boeing 737 MAX 8 aircraft and 23 Boeing 737-800 aircraft.

During the month, TUI Group and Oman Air became the newest operators of the Boeing 737 MAX, which has now been rolled out to 20 customers.

Jet makers tend to start the year softly as deliveries more or less peak towards year-end. For the next 11 months, Boeing needs 69-70 deliveries per month on average. Obviously, there is a gap between the 44 deliveries in January and the average required number of 67-68 deliveries for the full year. This gap is primarily caused by deliveries for the Boeing 737 being 16 units lower than the production rate and an upcoming production increase for the program later this year. On the wide body programs, Boeing saw deliveries more or less in line with production for the Boeing 747 and Boeing 777. Deliveries for the Dreamliner fell 4 units short of the production rate. For the Boeing 767, deliveries will pick up later during the year as the Boeing KC-46A is being rolled out to customers.

Important to note is that low deliveries in the first months of the year are pretty common. Year over year, Boeing’s deliveries remained constant, accounting for roughly 5 to 6 percent of the full-year delivery target, which is in line with last year’s share for January.

Book-to-bill ratio

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 January, Boeing booked 28 gross orders while delivering 44 aircraft, indicating a .64 book-to-bill ratio. In terms of value, this ratio was .76.

Conclusion

As expected, Boeing started the year slow with orders as well as deliveries. The order inflow remained below average while deliveries remained constant year over year. Drawing conclusions after one month is early and unrealistic… after all, there are 11 months left and we saw quite clearly last year that 1 single month can make a difference. It is important to observe that there was nothing extraordinary in the orders or deliveries during the month. What remains interesting to track are the Boeing 737 MAX orders. If Boeing has another strong year selling its single aisle product, we might be seeing another rate increase which obviously will benefit shareholders.