Each year, Boeing (BA) and Airbus (OTCPK:EADSF) 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 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 Airbus in February. The January report can be read here if you are a PRO subscriber or is freely available to our Premium subscribers.Order inflow February 2018
Figure 1: Orders Airbus February 2018
During the month of February, Airbus received a total of 40 orders:An undisclosed customer ordered 20 Airbus A320neo aircraft. Emirates firmed its order for 20 Airbus A380 aircraft.
In February something happened that we probably won’t see happening often and possibly will not see ever again: The Airbus A320neo and Airbus A380 both received 20 orders. For the Airbus A320neo it can be seen a relatively slow month, for the Airbus A380 20 orders is a lot.
Emirates ordered 20 aircraft, while Virgin Atlantic simultaneously dropped its order for 6 Airbus A380 aircraft. This is something we have been expecting for a while and has also been discussed with Premium subscribers in more detail.
A painful cancellation came from Hawaiian Airlines (NASDAQ:HA) that switched its order for 6 Airbus A330-800 aircraft to orders for the Boeing 787-9, but also this hardly came as a surprise.
Last year, Airbus received no orders in February, while 10 orders were canceled. In February 2016, Airbus received 2 orders while 7 aircraft on order were scratched from the order book. Averaging the net orders for the previous two years even shows that net orders were above average. So, order inflow for February 2018 was actually pretty good compared to previous months. Obviously, the Emirates deal was expected months ago already but it is good to see it ending up in the order book now.
For February, the list price of the orders was $10.9B, but after discount, this likely is closer to $4.3B.Deliveries in February 2018
Figure 2: Deliveries Airbus February 2018
For 2018, Airbus has set a delivery target of 800 units. In February, Airbus delivered 38 aircraft or 5 percent of the aircraft it expects to deliver in 2018:Just like in February there were no Airbus A380 deliveries, those will possibly pick up towards the summer. Airbus delivered 1 Airbus A330-200 in a inter-company transaction. Airbus delivered 8 Airbus A350 aircraft including the first Airbus A350-1000 which has been delivered to Qatar Airways. Deliveries for the Airbus A320 families were 19 current engine option aircraft and 10 new engine option aircraft.
Jet makers tend to start the year softly as deliveries more or less peak towards year end. For the next 10 months, Airbus needs 74 deliveries per month on average. Airbus is expecting to deliver 800 aircraft depending on engine manufacturers meeting their commitments. In February, deliveries of aircraft equipped with PW1100G turbofans were halted and that has impacted the delivery profile of the Airbus A320. Year-over-year, the hit was modest with a reduction of just 2 units in delivered aircraft in February for the single aisle program. Airbus expects deliveries to continue in April for the PW1100G equipped aircraft.
The big positive during the month was the delivery of the first Airbus A350-1000 to Qatar Airways, which had previously been delayed.
Important to note is that low deliveries in the first months of the year are pretty common. Year over year, Airbus deliveries decreased by 8 units accounting for roughly 5 percent of the full year delivery target, which is in lower than last year's share for February. What we’re seeing is not unexpected: The Airbus A320 delivery stop has affected February deliveries, while deliveries for the Airbus A330 and Airbus A80 are down offset by higher deliveries of the Airbus A350.
For 2018, Airbus expects to maintain a book-to-bill ratio of 1. For Airbus, reaching desired book-to-bill ratios 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 Airbus 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 February, Airbus booked 40 gross orders while delivering 38 aircraft indicating a 1.05 gross book-to-bill ratio. In terms of value, this ratio was 1.60. For the first 2 months, the gross book-to-bill ratio is 1.08, while this of course is nicely above 1 it is partly caused by lower deliveries on the single aisle program.
As expected, Airbus started the year slow with orders as well as deliveries and this continued in February. The order inflow, however, was better than in previous years.
Drawing conclusions after 2 months is early and unrealistic… after all, there are 10 months left, and we saw quite clearly last year that one single month can make a difference. For Airbus, it will be key to resolve engine issues on the Airbus A320neo program and successfully ramp up deliveries on the A350 program. While the engine problems are inconvenient for customers and Airbus, we do expect delivery patterns to normalize within 1-2 months and that Airbus should still be able to meet its delivery target. Furthermore we are not expecting problems on the production ramp up on the Airbus A350 programs. The A330 program is awaiting the delivery of the first Airbus A330neo and we don’t view the shrinking backlog of the current engine option A330 as a problem whatsoever. In fact, we think Airbus has done a good job bridging the gap by securing orders and bringing down production rate.
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Disclosure: I am/we are long BA, EADSF.
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