The orders and commitments announced by Airbus and Boeing at the Farnborough Air Show last week for the A330ceo, the A330neo, the Boeing 777-200LRF and the 777-300ER will help fill the looming production gaps for the two airplanes, but work by both OEMs still needs to be done.
See the production gaps, before the orders and commitments were announced, by clicking the following links:
As the charts indicate, Airbus and Boeing each have large gaps between the current backlogs and the current production rates: about 115 a year (10/mo) for the A330 and 100 a year (8.3/mo) for the 777. The charts include orders, options and letters of intent. Based on statements by company officials, they are counting on 100% conversion of options and LOIs to help fill the gap, topped off by new orders and commitments.
Airbus has been facing a dearth of orders for the A330 in recent months. Boeing will say that this is because the A330 has seen its day, now that the 787 program is on track (even if reliability, hovering just under 99%, still is short of the 99.7% goal). Airbus says that many customers have been sitting on the sidelines, waiting for a decision whether the A330neo would proceed. Now that it has, Airbus believes orders for the neo, and the ceo, will begin rolling in again.
Airbus launched the A330neo with 121 commitments.
Boeing announced 20 777 Classic orders and commitments.
Boeing’s production gap is more challenging to fully understand because there are a large number of orders and commitments listed in delivery dates to be determined in the Ascend data base, on which the analysis is based. Boeing’s 2015 and 2016 seem in pretty good shape (assuming 100% conversion of commitments, likely a challenge). From there, the gap increases. The 20 orders and commitments at the FAS are well under the rate necessary to fill the gap. Boeing says it needs 40-50 orders a year (we believe it closer to 40-60).
Airbus has a greater challenge. The A330neo is planned to enter service in 4Q2017, with a two year overlap for ramp up to the goal of 10 per month. Airbus’ production gap sharply increases from 2016. A large order for the A330 Regional, intended for the Chinese market, will fill the bill–if it materializes, but the government hasn’t placed an order since the program was announced 13 months ago.
Airbus says it plans to maintain A330 production at the rate of 10/mo through and beyond the EIS of the A330neo. We think this will be a challenge. Boeing says it will maintain the 8.3/mo rate to the EIS in 2020 for the 777X. We have our doubts about this, too–as do more and more Wall Street investment banks. Aerospace analysts are increasingly raising doubts about Boeing’s ability to maintain rate to the X’s EIS.
Airbus’ and Boeing’s ability to obtain more orders for their aging products by the end of this year should be telling. We think orders will drop off as EIS of the new derivatives nears, not increase. Let’s see if the two OEMs prove us wrong.