Airbus Is A Winner But Airplane Orders And Deliveries Point At Troubles (EADSF)

Airbus (OTCPK:EADSF) and Boeing (BA) are currently enjoying high demand in their end markets for commercial airplanes. However, issues remain at Boeing – the US jet maker is struggling to finalize orders. In this report, I will discuss the orders and deliveries for Airbus in May 2024. Of interest is to assess whether Airbus is able to significantly benefit from the problems at Boeing, and the Airbus order inflow could also provide us with an indication of what an undisturbed order inflow for Boeing could possibly have looked like. The delivery flow will also provide us with some indication of the health of the aerospace supply chain. While, generally, we have seen improvements in supply chain health, a full recovery seems to be several years away.

Airbus Books A330neo Orders

In May, Airbus booked 27 orders valued at $2.7 billion. The mix consisted of 20 widebody airplanes and seven single-aisle jets:

• An undisclosed customer ordered 20 Airbus A330-900 aircraft.
• Nordic Aviation Capital ordered seven Airbus A321neo airplanes.

During the month, the following order book changes and mutations took place:

• Air China converted orders for five Airbus A321neo airplanes to orders for five Airbus A319neo aircraft.
• JetSMART took over delivery slots for two Airbus A320neo airplanes from BOC Aviation.
• Saudia was identified as the customer for 93 Airbus A321neo airplanes and 12 Airbus A320neo airplanes.
• ICBC Leasing was identified as the customer for one Airbus A320neo.
• Nordic Aviation Capital cancelled orders for five Airbus A220-100s and seven Airbus A220-300s.

While the Airbus A330neo order was a nice highlight, the overall order inflow was not spectacular. Airbus booked seven orders for the Airbus A321neo, but those were offsetting cancellations for the Airbus A220 by dollar value. With 27 gross orders and seven cancellations, the net orders for the month were 20 units valued at $2.7 billion. In the same month last year, Airbus booked 17 orders and 17 cancellations bringing its net orders to zero and the mix also drove a zero net order value. Year-to-date, Airbus booked 254 orders and 17 cancellations bringing its net orders to 237 airplanes valued at $23.1 billion. A year ago, Airbus booked 178 gross orders and 34 cancellations, bringing the net order tally to 144 units valued at $12.7 billion. While I’m not particularly interested in comparisons between Boeing and Airbus, we can see that Boeing’s 103 net orders valued at $10 billion are significantly lower than what Airbus is currently enjoying.

Measuring the cancellations against the backlog shows that cancellation activity was just 0.1%, firmly supporting the strong demand environment for commercial airplanes.

Airbus Airplane Deliveries Fall

Airbus delivered a total of 53 airplanes in May, valued at $3.4 billion:

• Six Airbus A220 airplanes were delivered.
• A total of 41 Airbus A320neo airplanes were delivered, including 19 Airbus A320neo airplanes and 22 Airbus A321neo airplanes.
• Airbus delivered two Airbus A330-900neo airplanes.
• There are four Airbus A350 airplane deliveries, three for the -900 model and one for the -1000 model.

During the same month last year, Airbus delivered 63 airplanes valued at $4.2 billion. Year-over-year, we saw deliveries decrease by 10 units, or 16%. So, while we saw in earlier months that there were some signs of stability in the supply chain, we’re seeing delivery numbers that might be pointing at some strain in the supply chain again as we also saw the deliveries fall sequentially. The reduction in deliveries was primarily driven by the Airbus A320neo and Airbus A330neo families, partially offset by the Airbus A220 family deliveries.

Year-to-date, Airbus has delivered 256 airplanes valued at $16.2 billion, compared to 244 deliveries valued at $15.3 billion a year ago. However, what we do show is that deliveries are not significantly higher compared to a year ago, which once again to me confirms that the supply chain remains in a challenging spot.

The book-to-bill ratio was 0.5x in terms of units and 0.8x in terms of value. Year-to-date, the book-to-bill ratio in terms of units is 1x and 1.5x in terms of value. While book-to-bill ratios above one tend to signal strong demand, for commercial aerospace they are currently also driven by airplane production still being below undisturbed levels.

Conclusion: Airbus Stock Is Appealing But Deliveries Remain Challenged

While we have seen airlines such as United Airlines look at Airbus products to solve their shortage of Boeing airplanes, across the board we’re not seeing a strong indication that Airbus is benefiting significantly from the problems at Boeing. In fact, what we’re seeing is that the delivery volumes are without significant doubt pointing at continued challenges in the aerospace supply chain. Airbus has had to step back from a very ambitious production ramp-up schedule in the previous years, and while I do believe that Airbus should still be able to meet its delivery targets for the year, I do think that the aerospace supply chain health is worse than Airbus had expected.

What remains is that the company enjoys a very strong demand environment and its product portfolio is strong with high appeal to customers and a more stable production environment compared to its main competitor.

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