Boeing Books $14.3 Billion Worth Of Orders

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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.

Afbeeldingsresultaat voor 787

Source: The Boeing Company

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 June 2018. If you have missed the April edition, you can read it here. The article is paywalled but is freely available to subscribers and trial members of the AeroAnalysis Marketplace service.

Orders in June

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Figure 1: Orders Boeing June 2018

During the month of June, Boeing received a total of 233 orders valued $14.3B after discounts:

  • Boeing Capital Corporation ordered 75 Boeing 737 MAX aircraft.
  • An unidentified customer ordered 75 Boeing 737 MAX aircraft, this likely is an order from Jet Airways.
  • A Business Jet customer ordered 1 BBJ MAX.
  • Two unidentified customers ordered 20 and 30 Boeing 737 MAX aircraft respectively.
  • FedEx (NYSE:FDX) ordered 11 Boeing 767-300Fs and 9 Boeing 777Fs.
  • An unidentified customer ordered 2 Boeing 767-300Fs.
  • An unidentified customer ordered 10 Boeing 777Fs.

Cancellations increased from 70 to 149. It is likely that a customer canceled 75 of its Boeing 737 orders and these slots were subsequently taken over by Boeing Capital Corporation to lease the aircraft to the initial customer. The other 4 cancellations are for the Boeing 777.

June was a very strong month where Boeing booked 233 orders versus the three- and five-year average of 116 and 147 units. In the first six months, Boeing booked 460 net orders versus 405 net orders last year. So, Boeing is having a strong first half of the year and it will be interesting to see how many new orders they will announce during the upcoming Farnborough Airshow. Part of the unidentified orders announced to date are likely going to be revealed during the Farnborough Airshow. While Boeing is having an extremely strong start of the year, Boeing can’t afford a sales stall during the Farnborough Airshow. The year-over-year improvement could easily slip with a few weak months. Also interesting to observe is that Boeing needed some wins from Airbus to grow its order inflow year-over-year.

Deliveries in June

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Figure 2: Deliveries Boeing June 2018

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 June, Boeing delivered 82 aircraft, up 14 units from a month earlier:

  • Boeing delivered 56 Boeing 737 aircraft, including 23 of the MAX variant. The delivery volume was above the increased production rate of 52 aircraft per month, but likely is not reflective of the increased production rate being in effect.
  • Boeing 787 deliveries were slightly above the production rate of 17 aircraft per month.
  • Boeing 777 deliveries were above the production rate of 3.5 aircraft per month for the Boeing 777 Classic.
  • 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. One Boeing 747 and two deliveries took place for the Boeing 767.

Delivery volume during June showed a strong improvement month-over-month. The key programs for Boeing, namely the Boeing 737, Boeing 787 and Boeing 777 all showed satisfactory outputs. As expected, Boeing ended the quarter with a strong delivery output, which is something we saw during the first quarter as well.

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.

In June, Boeing booked 233 gross orders while delivering 82 aircraft, indicating a 2.84 book-to-bill ratio driven by a strong order inflow. In terms of value, this ratio was 2.20 primarily reflecting order volume. For the first six months of 2018, the gross book-to-bill is 1.60 and 1.61 in terms of a value. So Boeing is having a year so far.

Conclusion

In June, Boeing booked several big orders for the Boeing 737 MAX, one of which likely covers a cancellation during the month. What we are clearly are seeing is how Boeing is benefiting from the robust demand for cargo aircraft. Boeing has been waiting on a revival of that market for years, but having a strong product line up to serve that market is now paying off.

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 a 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.

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Disclosure: I am/we are long BA, EADSF.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Source : https://seekingalpha.com/article/4186768-boeing-books-14_3-billion-worth-orders

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