Boeing Leads Airbus In The Race For New Commercial Airplane Orders In 2014

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Boeing (NYSE:BA) is leading its European competitor, Airbus, in the race for new commercial airplane orders in 2014. Through July this year, Boeing has mopped up orders for 833 commercial airplanes, compared to 705 orders received by Airbus. [1] [2] The launch of wide-body 777X by Boeing late last year has given a boost to its order tally this year. On the other hand, Airbus has had to suffer from a large order cancellation for its A350 from Emirates.

This order tally of Boeing vis-a-vis Airbus’ is in stark contrast to last year when Airbus led Boeing in net commercial airplane orders. In 2013, Airbus bagged orders for 1,503 commercial airplanes, while Boeing managed to get orders for only 1,355 airplanes. [3] For most part of the last decade as well, Airbus has led Boeing in annual commercial airplane orders, driven by strong demand for its narrow-body A320s. However, the gap in annual orders for Airbus and Boeing has been very narrow, which is indicative of the intense competition that exists between these two airplane manufacturers.

We currently have a stock price estimate of $136 for Boeing, around 10% ahead of its current market price.

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Boeing Leads In Orders For Wide-Body Airplanes, But Competition From Airbus Is Growing

Boeing holds clear lead in the wide-body commercial airplane segment, in which its 777 and 787 Dreamliner models compete with Airbus’ A330 and A350 models. In the current year through July, Boeing has received orders for 255 777s and 27 787 Dreamliners. [1] In comparison, Airbus has received orders for 29 A330s and net cancellations for 70 A350s. [2] This negative order tally for A350s is surprising as this airplane received 230 orders last year. [4] The prime reason for this year’s negative A350 tally is the large order cancellation from Emirates in June earlier this year, driven by that airline’s decision to review its fleet plans.

On the other hand, Boeing’s orders in the wide-body airplane segment have been driven by the launch of 777X, which features new engines from GE Aviation, composite wings and superior aerodynamics. Boeing has promised the 777X to be 12% more fuel efficient and 10% more cost efficient than the plane’s competitors, and we figure this high efficiency is the primary factor behind the strong customer response that this plane has received. [5]

At the same time, this year’s negative order tally for Airbus’ A350 will likely not persist for long. This airplane has also received good response from airlines reflected by a healthy cumulative order tally of around 750 units that this airplane has received since its launch in 2006. [4] Thus overall, the A350 has helped Airbus challenge the domination of Boeing’s 777 and 787 Dreamliner models in the wide-body commercial airplane segment. The Airbus A350 is set to make its first delivery later this year. These A350 deliveries will in the coming years exert pressure on Boeing’s share of global commercial airplane deliveries.

The global wide-body commercial airplane segment is forecast to be one of the most important segments of the global commercial airplane market. According to long term market outlook from Boeing, over the next two decades, nearly 8,000 wide-body commercial airplanes worth $2.3 trillion will be delivered to airlines. [6] And, Boeing with its 777 and 787 Dreamliner models, and Airbus with its A330 and A350 models, are seeking to bag as large a share of this market as possible.

Additionally, Airbus has already reached parity with Boeing in the narrow-body commercial airplane segment. In this segment, Airbus’ A320 series is outselling Boeing’s 737s. In the current year through July, though Boeing leads Airbus in the overall order tally, its 737s have received fewer orders than Airbus’ A320s. Through July, Boeing’s 737s received 550 orders, compared to 732 orders received by Airbus’s A320s. [1] [2] Airbus on its part, has been hit severely this year by the negative order tally for its A350s.

All in all, 2014 like many previous years, will likely see a close finish to the top in airplane orders received by Boeing and Airbus.

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Notes:
  1. Boeing’s orders through July 2014, August 18 2014, www.boeing.com [] [] []
  2. Airbus’ orders through July 2014, August 18 2014, www.airbus.com [] [] []
  3. Competition between Boeing and Airbus, August 18 2014, www.wikipedia.com []
  4. Airbus’ A350, August 18 2014, www.wikipedia.com [] []
  5. Boeing 777X to Deliver Unprecedented Efficiency and Economics, November 18 2013, www.boeing.com []
  6. Long term market outlook for commercial airplane, August 18 2014, www.boeing.com []