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Airbus and Boeing face order challenges

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Airbus and Boeing face order challenges

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Airbus and Boeing are neck and neck in their intense battle for airliner orders according to the latest information from the two planemakers with the European company closing the gap on its US rival between January and July.

But the more significant number is that combined orders for the two were down 17 percent from the same period last year, with the aviation market somewhat oversupplied.

As James Bevan, Chief Investment Officer at CCLA Investment Management, explained: “There are two challenges that they face in terms of order flow. First of all the number of airlines that want to have fleets for national pride purposes is clearly declining as the global economy remains weak. Secondly there has been consolidation in terms of airlines wanting to co-participate in routes as evidenced by the Quantas/Emirates deal."

Backlogs but also vulnerability

The order slowdown, and an increasing number of deferrals of orders by airlines in recent weeks, is raising questions over whether the two dominant planemakers will stick with their plans to boost output in the coming years.

The audit and consultancy firm Deloitte has concluded that 13 percent of the industry’s massive order book is vulnerable to deferral or cancellation.

Even though Airbus and Boeing have production backlogs of six to 10 years based on their current order book totals, James Bevan said future profitability for both companies must be based on renewal and repair.

Flying high – the numbers

Airbus said it had sold a total of 373 jets between January and July, or 323 after adjusting for cancellations.

That compares with 383 airplane sales, or 333 after cancellations, by Boeing.

Recent cancellations

Two industry sources said Indonesia’s Lion Air, one of the largest jet buyers with hundreds on order from Boeing and Airbus, is weighing the deferral of about 25 Airbus jets.

Airbus declined comment and Lion Air was not available.

Mexican low-cost carrier Interjet has canceled five of 40 A320neo jets it has on order, according to an Airbus monthly update.

An Interjet spokeswoman said the change was part of an “operational swap,” without giving further details.

New Airbus data also incorporated the cancellation by Qatar Airways of the first of 50 A320neo-family jets it has ordered.

The Doha-based airline airline pulled out because of delays caused by issues with the plane’s Pratt & Whitney engines.

Qatar is reportedly talking to Boeing about buying as many as 30 of its 737 Max jets instead.

Australian airline Qantas has also said it has no plans to buy any more Airbus A380s. It has 12 of the double-decker superjumbos in service and Airbus has eight more still listed on its order books for delivery to Qantas.

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