Boeing February Orders Provide Little Support – The Boeing Company (NYSE:BA)

AeroAnalysis has been tracking the monthly order inflow for Boeing (NYSE:BA) and Airbus (OTCPK:EADSF) aircraft for a couple of years. For long-term investors, a single month doesn’t mean much. Indeed, a single month does not make a trend, but by closely tracking the order and cancellations activity, we always will be a step earlier in detecting trends and will have detailed insight into customers’ appetite to order and take delivery of aircraft, and we can even track it by type as well as the jet maker’s ability to reach any set sales target.

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.

Source: Airline Ratings

In this report, we will have a look at the orders and deliveries as well as cancellation activity for Boeing during the month of February. While the report seems to be a simple summarizing piece, I spent a considerable amount of time to get all data right and present it in a useful way, including graphics, and we uniquely provide market value estimates contrary to list prices. Subscribers of The Aerospace Forum are given access to a fully interactive infographic built on order and delivery data from Airbus and Boeing. If you are interested in reading Boeing’s monthly overview for January, you can check it out here.

Note from Author: These are extremely challenging times to cover the aerospace industry as we are dealing with a crisis (COVID-19) on top of another one (Boeing 737 MAX). Since October 2018, we have set up dedicated coverage of the Boeing 737 MAX crisis next to our regular coverage such as monthly order and delivery overviews. With the added complexity of COVID-19, maintaining timely coverage is challenging, and I hope that readers understand that I continue to put all efforts into providing coverage as fast as possible, but given the added workload and not to overflow the system, I have to prioritize certain reports and delay others. For those interested in the timeliest content, I’d recommend joining the free trial for The Aerospace Forum.

Orders February

Boeing Orders February 2020

Figure 2: Order Boeing January 2020 (Source: AeroAnalysis)

In February, Boeing booked 18 orders valued $2.8B:

  • Air Lease Corporation ordered 3 Boeing 787-9s.
  • FedEx (NYSE:FDX) ordered 1 Boeing 767-300F.
  • Oman Air ordered 4 Boeing 787-9s.
  • Two unidentified customers placed orders for 4 and 3 Boeing 787-10s.
  • One unidentified customer ordered 3 Boeing 787-9s.

Order book changes during February were as follows:

  • Air Canada (OTCQX:ACDVF) cancelled orders for 11 Boeing 737 MAX aircraft.
  • Air Lease Corporation (NYSE:AL) cancelled orders for 9 Boeing 737 MAX aircraft swapping them for 3 Boeing 787-9s.
  • Oman Air cancelled orders for 10 Boeing 737 MAX aircraft swapping them for 4 Boeing 787-9s.
  • Japan Investment Adviser cancelled orders for 10 Boeing 737 MAX aircraft.
  • A business jet customer cancelled an order for 1 Boeing 737 MAX BBJ.
  • LATAM Airlines Brasil cancelled an order for 1 Boeing 777F.
  • Oman Air converted orders for 4 Boeing 787-8s to orders for the -9.
  • El Al was revealed as the customer for 1 Boeing 787-8.
  • Gulf Air cancelled orders for 4 Boeing 787-9s.

Year-over-year gross order inflow increased by 13 units to 18. The three- and five-year averages for February are 26 and 30 sales, respectively, so Boeing order inflow was below average though this shouldn’t come as a surprise. During the month, we saw Boeing converting orders for the MAX to orders for the Dreamliner, likely part of an effort to fill the Boeing 787 skyline and reduce Boeing 737 MAX liabilities. The LATAM Airlines Brasil cancellation for the Boeing 777F, was one I already marked in October 2019. Boeing still has one order in the books from LATAM for the Boeing 777F, and I expect this order to be removed in the future as well.

Deliveries in February

Boeing Deliveries February 2020

Figure 1: Deliveries Boeing February 2020 (Source: AeroAnalysis)

For 2019, Boeing set a delivery target of 895-905 units. In December 2018, AeroAnalysis set a 2019 delivery estimate of 891 units, including tanker deliveries, and up to 917 at the high end, the midpoint is at 904 deliveries. These numbers were reasonably close to Boeing’s guidance prior to the jet maker pulling its full-year guidance in the aftermath of the Boeing 737 MAX jet. For 2020, Boeing has yet to provide a guidance, but we expect it to be significantly depressed due to COVID-19.

In February, the company delivered 17 aircraft, an increase of 4 units compared to last month:

  • Boeing delivered one Boeing 737-800A.
  • Boeing delivered no Boeing 747s during the month.
  • Boeing delivered two Boeing 767s during the month, 3 freighters but no tankers.
  • Boeing delivered one Boeing 777F, below the delivery rate of 3 aircraft per month.
  • Boeing delivered 12 Boeing 787s, 1 -8, 8 -9s and 3 -10s, which is lower than the production rate of 14 aircraft per month.

The delivery numbers continue to be impacted by the Boeing 737 MAX grounding, and that’s set to continue well into the coming years when compared to the initial production plans. What we are seeing is the delivery profile of a company that’s facing incredibly big pressure at the moment. Wide body deliveries were low, but that’s to be expected for the first quarter of the year as Boeing has tried to clear the inventories as much as possible in December, but we could be facing a big drag on deliveries throughout 2020.

Book-to-bill ratio

For 2020, there likely aren’t any order targets for Boeing as the Boeing 737 MAX remains grounded, possibly well into late 2020. With no orders during the year the book-to-bill ratio obviously was zero. Boeing booked 18 orders and delivered 17 aircraft, bringing the company’s gross book-to-bill to 1.1 in terms of units but also value.

Conclusion

Normally expectations for aircraft sales are high with some minor concerns about trade and geopolitics dampening demand. 2020 will be a challenging year for Boeing and generally for the airline and commercial aerospace industry. The return-to-service of the Boeing 737 MAX should be a milestone for Boeing, but after that, the more challenging sales campaigns will start, and it won’t be easy for Boeing to secure orders as the company will want to bag orders but also not at a price that will affect the long term pricing of aircraft. So, Boeing is in a tough spot where cancellations could and likely will still occur. With the COVID-19 outbreak hitting airlines hard, we are no longer expecting a strong year in the wide body segment and likely will see a damper on Boeing 737 MAX recovery as well.

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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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