787, A350 “way over-ordered,” says UBS

In an analysis that might create heartburn for any number of people at any number of levels, David Strauss and his aerospace team at UBS Securities issued a report Tuesday (April 27) that concludes the next-generation of airplanes–the Boeing 787 and Airbus A350–are “way” over-ordered.

The “good” news (tongue-in-cheek, for those who don’t pick up on our odd humor) doesn’t stop there. UBS concludes that the Boeing 777,  Airbus A330 and Airbus A320 are also over-ordered.

The Boeing 737 is under-ordered, in the UBS view,  but this doesn’t relieve the concerns about this order-book, either, according to UBS.

UBS concludes that there are nearly 400 excess wide-body orders that could be deferred, including a whopping 275 787s (out of nearly 900). Qatar, Singapore, Gulf Air, Qantas and launch customer All Nippon are identified as over-ordering the 787 in UBS’ analysis.

The A350, with somewhat more than 500 firm orders, has been over-ordered to the tune of 250 aircraft, UBS concludes. Qatar, Singapore, US Airways, Alitalia and Kingfisher are among those at risk to defer, UBS writes.

There are 152 A320 over-orders, with Wizz Air, IndiGo, US Airways and Tiger Airways among those potentially at risk for deferrals.

TAM, Shenzhen, China Southern, easyJet and Air China are among those needing A320s, UBS writes.

UBS concludes that carriers operating 737s need to order a net of 206 more airplanes to accommodate growth and retirements over the next 5-8 years, but some of Boeing’s biggest 737 customers also over-ordered. These include LionAir, over-ordered by a whopping 123 737s. All others in an over-order position did so by 36 or fewer airplanes.

American Airlines,  with a large MD-80 fleet, needs 98 more 737s. China Southern, Southwest, GOL and Ryanair also need sizable fleet orders to meet growth and retirements.

There are a net of 33 over-orders for the 777 and a net of 83 A330s.

The 37-page report is highly detailed.

16 comments on “787, A350 “way over-ordered,” says UBS

    • The report didn’t provide specific commentary on the A380 but the tables conclude Emirates, the largest A380 customer, is over-ordered by five aircraft of all types. UBS also sees a net under-ordering of the 747 by 44 units, mostly for Cathay Pacific, with Nippon Cargo (a financially ailing carrier) at risk of cancellation of all 14 747-8Fs.

      • So why 747s for Cathay, and not just generic underordered VLAs? Why couldn’t those be underordered A380s or 777s? Has UBS done analysis that finely grained that they can ascertain the carrier’s future strategy regarding its fleet? Working as an analyst myself, I don’t have a lot of confidence in this. It’s easier for one-type airlines (SWA, FR).

      • “Has UBS done analysis that finely grained that they can ascertain the carrier’s future strategy regarding its fleet?”
        Andreas, I think you are being too generous to UBS with regards to their methods of working :-)

  1. 400 widebodies over ordered
    -275 B787
    -250 A350
    -33 B777
    -83 A330
    ————–
    -241 missing orders?
    ( or what is a negative “over order” )

    Have i missed something?

    The meme soaked feeding frenzy that was the
    introduction of the Dreamliner into the market
    certainly wasn’t expected to be completely real.
    Similar for the 350XWB.

    Surfing the crest before it broke in 2009 created
    quite a lot of irrealities. Phantasms rubbing off from
    the monetary world.

  2. Scott,

    This is a slightly confusing report with claims of some over ordering as well as underordering.

    Why is it that several carriers have been pushing for earlier delivery and Boeing has increased the production of the 747 as well as the 777 based on demand.

    The demands for the 787 have been steady with few cancellations and deferrals and both American Airlines and Delta have not weighed in with their expected large confirmations. The possible merger of United and Continental will also change some dynamics .

    I would not take this report too seriously unless the analyst thinks the globe is shrinking rather than growing

    • BA Investor,
      Sorry but do you really believe that 93 cancellations is few? That is roughly 10% of all firm orders. Granted with 866 firm orders remaining, the program seems to be in good shape but I wouldn’t consider 93 cancellations an insignificant figure.

  3. Aero Ninja,

    I was just trying to indicate that there are several large orders i.e. American and Delta that are not figured in these estimates.

    Also, deferrals are not cancellations and there seem to be enough carriers willing to accept earlier planes to blunt these changes.

    Again, from present production rates and order indications, there does not seem to be the conditions suggested by UBS. Their report is a dire description and I think it lacks deeper understanding that others do not share.

  4. leehamnet,

    Perhaps you are willing to share the information you just referred to so we get a better idea of its projections….at least for the five carriers mentioned.

  5. leehamnet,

    Thanks for response but not sure what your provided information indicates.

    Is this a list of the number of planes that are considered overordered or a list of planes required in the future ?

    I am confused because Ryanair is looking for 200 planes ( at least publicly) and AA indicated intention (subject to pilot ratification of 787 pay) to order 100 787 planes. Delta also has not placed an order for the 787′s.

    I do realize that you have indicated “all types” and maybe the overordering is comng from the smaller weaker carriers/ Please clarify

    • Unless you read the entire 37 page report with its full detail on equipment type, you’re just going to have to take our synopsis at face value. We do not as a rule download an analyst report for full and free access to everyone because, after all, the analysts sell their reports and there are also SEC rules and corporate policies regarding distribution.

      Fundamentally, UBS analyzed historic and announced growth plans (or capacity cuts) for the Top 100 customers of each of Airbus and Boeing, orders and retirements and extrapolated in its analytics and determined whether the airline over- or under-ordered. So, for example, in the case of Ryanair publicly saying it wants 200 airplanes, UBS’ analysis is that it only needs 140 based on the above-metrics.

      AA hasn’t firmed its contract for the 787 (for the reason you state) so Boeing doesn’t have AA on its order-book and UBS didn’t take this into account for this equipment type. UBS did look at AA’s aging 250 MD80s and other types and compared these numbers against firm orders and the metrics and concludes AA needs another 131 orders. And so on.

      So with the expectation that we’ll further disappoint by not linking the report nor going into further detail, we’re done on this one and moving on.

Leave a Reply: Note Reader Comment Rules

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s