Boeing smoking Airbus at Farnborough Airshow


Aerospace-Boeing 737 MAX 10-BA
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The Farnborough Airshow returned last week and is the biggest aviation industry event since the start of the COVID-19 pandemic. Boeing (bachelor -2.01%) as well as Airbus (EADSY -0.07%) they usually use biennial meetings to negotiate and announce large aircraft orders.

Airbus had a quiet week with few order announcements. Meanwhile, Boeing announced more than half a dozen deals, including an order for 100 737 MAX 10 aircraft from Delta Air Lines.

With this momentum in orders, Boeing shares rose 7% last week, outperforming the market. But while the American aerospace giant scored an important victory at Farnborough, it still faces huge challenges in the commercial aircraft market, largely due to its worst narrow-body aircraft portfolio compared to Airbus.

No big splashes for Airbus

Airbus announced three orders last week. First, Delta added another 12 firm orders to its A220 order book. Secondly, EasyJet has increased orders for 56 aircraft of the A320neo family. Thirdly, LATAM Airlines ordered 17 additional A321neos.

Thus, Airbus during the air show in Farnborough announced orders for only 85 aircraft. Also, EasyJet announced its order a month ago and was just waiting for shareholder approval to confirm it. However, Airbus executives maintained a confident tone, saying they mainly used the airshow to talk to suppliers about production bottlenecks rather than fully focusing on signing big new orders from airlines and leasing companies.

Boeing is getting big

Unlike Airbus, Boeing’s sales team has had a busy week. In addition to a massive order from Delta Air Lines, on Monday Boeing officially announced a previously undisclosed order from Japan’s ANA Holdings for 20 737 MAX aircraft.

Boeing announced three orders the next day. Miami-based investment company 777 Partners, which owns stakes in various low-cost airlines around the world, has placed a firm order for 30 high-density 737 MAX 200 aircraft. Aircraft leasing giant Aerocap ordered five more 787-9s. Finally, Aviation Capital Group placed orders for 12 additional 737 MAX 8 aircraft.

Later this week, Boeing reported that Qatar Airways had confirmed an order for 25 737 MAX 10s, completing a memorandum of understanding announced in January. He also signed a memorandum of understanding with Azerbaijan Airlines for four 787-8 aircraft and said that Cargolux had selected the new 777-8 cargo aircraft as a possible replacement for its 747-400 cargo aircraft.

Image Source: Boeing.

Overall, this activity secured firm Boeing 172 orders for the week (including a strengthened Qatar Airways deal) as well as a four-aircraft commitment by Azerbaijan Airlines. This will nearly double the company’s total year-to-date orders after it reported 205 net firm orders in the first half of 2022.

Win the battle but lose the war

Boeing’s “victory” at Farnborough was an important step in the right direction. However, Airbus recorded 259 net firm orders in the first half of the year, ahead of Boeing’s 205. So even after signing many more orders last week, Boeing has only a modest lead since the start of the year.

What’s more, just a few weeks ago, Airbus secured commitments for a total of 292 aircraft from several major Chinese airlines. If they strengthen later this year, Boeing will face an uphill battle to maintain its lead in the 2022 order race.

Most importantly, Airbus has thousands more orders in its backlog than Boeing, with narrow-body aircraft accounting for a complete mismatch. Boeing is far from equal to Airbus, and this fact will not change anytime soon.

Boeing’s smallest commercial aircraft, the 737 MAX 7, cannot effectively compete with the Airbus A220 family, purpose-built for the 100 to 150 seat market. Meanwhile, neither the 737 MAX 9 nor the 737 MAX 10 can match the range and airfield performance of the A321neo (especially its long haul variants).

Even with a decrease in market share and production, Boeing will be able to make a decent profit over the next few years. However, the company will have to spend many years of free cash flow to correct a weak balance sheet. Meanwhile, Airbus is on an impeccable balance sheet and is poised for significant growth as supply chain restrictions ease. This makes Airbus shares much more attractive to invest than Boeing shares.

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