Odds and Ends: Boeing leads net orders YTD; A320neo; ExIm Bank; Frontier Air

Airbus vs Boeing orders: Airbus reported its order tally through August and while it surpassed 1,000 gross orders, it’s net orders trail Boeing significantly. This article sums things up nicely, though it doesn’t include Boeing’s last four days of August. Boeing reports weekly and the latest report is due out today. Through August 26, Boeing trails Airbus slightly in gross orders but leads in net orders.

Update: Boeing just posted its weekly order tally: 1,004 gross orders (to Airbus’ 1,001) and 941 net orders, still well ahead of Airbus’ net orders.

A320neo first flight: Airbus will launch the first flight of the A320neo this month for the airborne test program. This is powered by the Pratt & Whitney GTF; the CFM LEAP A320neo is supposed to follow by about six months. Entry-into-service for the GTF neo is planned for October 2015.

ExIm Bank: Members of Congress are looking at a short-term extension of the ExIm Bank‘s authority (read: until after the November election).

Frontier Airlines: This carrier is rapidly converting to an Ultra Low Cost Carrier business model, a process begun several years ago and accelerated last year. Aviation Week has an article that takes a look.

Go Seahawks: The NFL season opens tonight with the 2014 Superbowl champs Seattle Seahawks hosting the Green Bay Packers. Go Hawks!

25 Comments on “Odds and Ends: Boeing leads net orders YTD; A320neo; ExIm Bank; Frontier Air

  1. The order tally month by month is not very significant, even more if you consider the famous 13th month of John Leahy.
    IMHO, the most important event lately is the euro/dollar rate evolution. It’s today less than 1,30 dollar for 1 euro instead of more than 1,40 a few weeks ago.
    A change of 10 cents on the dollar/euro rate means 1 billion euro more (or less) profit for Airbus. Goldman Sachs just predicted 1,15 dollar for 1 euro in 2015 and 1 dollar for 1 euro in 2017. The impact for aerospace industry will have to be scrutinized.

    • Airbus is of course aware of the impact of the dollar exchange rate and hedges against fluctuations:

      Part of the strategy is to let customers pay in euros instead of dollars (and even convincing them to do so). I would imagine that having a FAL in the US may also help them in the long run, as wages in Mobile would obviously be paid in dollars. Now – big question is of course how much value Mobile adds to the overall cost of the plane, i.e. how big the impact of paying labour in US$ in Mobile is going to be.

  2. Excellent point Birdy. If the dollar does keep building strength vs. the Euro, AND Exim is not reauthorized, it could make for some interesting campaigns/orders for Airbus from some domestic US carriers over the next 12-18 months (and potentially even impact BBD as well).

    • I wouldn’t be cheering for a Euro below about $1.20 USD. The EU economy is shaky now with the PIGS still having financial trouble. France isn’t much better than the PIGS right now. Germany cannot afford to carry the whole of the Euro on its financial back much longer without sucking Germany into what France is experiencing right now (high inflation, high unemployment, low tax receipts, and high costs social programs).
      Airbus may be able to sell a lot of airplanes at a “low costs” with a weakened Euro compared to Boeing and a strong dollar. But at what real costs? Airbus alone will not turn the EU economy around, just as Boeing cannot do it in the US. If the Euro is even lower when time comes to deliver this bounce in Airbus orders, even they will loose billions.
      Be careful what you wish for.

      • Firstly – as for Germany “carrying the whole of the Euro” – let’s not get into politics, but I would propose to consider that not everybody would agree with this notion. Not even in Germany. A lot of Germany’s exports are other Eurozone countries’ debts, after all.

        Anyway; I’m native German (one of the “paying nations” if the German tabloids are to be believed), but I do live in Ireland, and I’d like to state for the record that I find the acronym PIGS (or PIIGS) incredibly offensive.

        All of those four countries had and have their issues, but the major common thread is the symptom (lack of money), not the cause. Pooling them together like this implies an “easy” common cause that does not and did not exist (and in this context, France, a completely different case altogether, was also thrown into the mix).

        Furthermore, pooling them together under an acronym that just coincidentally has more than a whiff of being derogatory is just plain offensive.
        Which may be why is why its use in economics journals and papers ceased quite quickly.
        (Ref: https://en.wikipedia.org/wiki/PIGS_(economics) )

        Add to that that PIGS is a term of the past, coined some six years ago. It arguably wasn’t an accurate reflection at the time and is much less so today.

        Apologies for the somewhat political subject, but this is chiefly in response to the use of a specific acronym as part of the discussion about Airbus’ exposure to exchange rates.
        If you still feel this doesn’t adhere to reader comments guidelines, please accept my apologies and feel free to delete my comment.

        • We wondered what the term meant and certainly didn’t know of its background. I doubt most American readers did, either, so Anfromme’s commentary is appropriate to clarify this.

        • kc135topboom,
          “what France is experiencing right now (high inflation, high unemployment, low tax receipts, and high costs social programs)”
          What France is facing right now is the risk of DEFLATION, that has been the problem in Japan for the last 30 years.

  3. Go Hawks! Indeed!
    Good things will happen again this year. Russel Wilson looks like he will take a significant step forward in his development. Couple that on offense with a still very good defense means the Hawks will be a legit Superbowl contender again.

    • The Hawks won’t fly this year. The New England Patriots will take it all. My local team, the Dallas Cowgirls will still be wall flowers waiting for the big dance.

  4. My wife is flying Frontier and they have more than made the leap

    Nice low fare, when we got done with her mandatory improved legroom and baggage the price close to doubled.

    Also a royal pain in dealing with their system.

    We used to just pay that fare, get legroom and a couple of bags.

    So all we have got is the pain of dealing with it and the cost is the same as the rest of the flights. Its one advantage was it was direct (also very important).

    Anyone ever want to not go direct? Our choice, hmm, yep, if we have it, the of course its our choice to go to a hub even if we don’t want to.

    Days of enjoying flying are gone.

  5. If Boeing cannot fill the still available NG production slots incentives are low to allow upgrades. (While cranking up production numbers now will increase NG slots.)

    • Yeah….Boeing seems to be cranking up 737NG production as the price they can command for the 737NG is certainly declining considering other potential options: the A320CEO, A320NEO and 737MAX. Furthermore, the A320NEO commands a 60% market share compared to the 737MAX leaving Boeing to hunt “Unicorn Profits” via sales to the likes of Ryanair – an Airline with whom Airbus snubs because of Ryanair’s unreasonable demands concerning Jet Prices. (http://in.reuters.com/article/2014/09/05/us-ryanair-aircraft-idINKBN0H014720140905)

      In short, the profit prognosis for the Boeing 737 – in either 737MAX or 737NG Versions – appears to be one of long-term decline. This is especially troubling considering the Boeing 787 is a financially-failed program, the Boeing 747 and Boeing 767 will never make money again, and profits for the Boeing 777 are about to be squeezed as production declines as Boeing spends money getting the Boeing 777x ready to enter service.

      On the bright side for Boeing – the Boeing 777x is selling very well. The Boeing 777x will have a special carbon-composite folding wing. However, Boeing has never built a fully composite wing – especially a commercially-oriented wing that one that folds. So…I have no reason to believe the financial risk of the Boeing 777x Program is low: especially considering that the last three development programs Boeing has undertaken related to it’s commercial aircraft (i.e., 747-8, 787, 767 Tanker) have been financial busts so far.

      • I don’t really understand that the A380NEO is having 60 of the market compare to the B737MAX. In total number sor far yes, but they are not being produced at the same time for a while. If you look at the first tree years of production (2015-17 for A320NEO, 2017-19 for the MAX) is there going to be at 60 to 40 build rate between the two? I doubt it. And if that is the case, does that mean that the B737NG will have (80% or more) of the market in 2016 since Airbus will more likely be producing only the A320NEO?

      • 60% is sales, not production. Sales in 2020+ do not translate into a correct comparison for 2014.

        Actual production is what the percentage should be based on just like Autos or anything else.

        I think my last calcs had Airbus ahead on production by 3%, Boeing is increasing, Airbus is considering increasing, so that may shift closer to 50% depending on what Airbus does (I also see more and more shifts to NEO from CEO and that can mean gaps)

        You have to disregard monthly build rates as that varies some and Boeing has a 12 month rate and Airbus 11.

        How that works is unknown until the production is in the bag and paid for. Month by month or year end.

        Actually the best metric is delivered.

        That’s not to defend Boeing. Its a simple fact of life. Airbus obviously has a very good product in the A320, but if they don’t produce it by more than Boeing does the 737, their actually delivered production is not as high as total sales, not year to year and delivered continues to be the right metric.

        Sales can indicate a future trend (or a nice cushion), but only if that’s backed up by production.

        Boeing by their own mistakes was slow off the mark, 2 years behind, so yes the A320 series has more sales. If they made more per month by a 6 to 4 ration they would also have a higher market percentage, they do not and they don’t

  6. Thank you Emirates for your deceptive moves. I hope Boeing does well. I also hope Airbus does well and that the A330 Neo and the A350-1000 will show their teeth soon! IMHO, the A330 Neo and 777-8x will be the most interesting planes, whilst the A350-1000 the safest bet and best all around package deal in the 360-400 pax category.

    • Lets see how it does before we jump the gun. there will be problems, how bad they are or are not is still to be proven.

      We have a good baseline on the 787, we do not on the A350.

      • Well, we do have a range of hints what to expect. The a350 had its delays early, well contained and reasonably cheap. Flight testing and certification seems to have run its course in quite an unremarkable manner. All very much in character. IMHO they have a good chance to continue in that vein.

        • I expect that the A350 should be making money by the time they crank out the first 80-100 Frames if Airbus has priced, designed, planned and executed well. [and they have certainly had the time to do all that!] Also, the money they lose before they break even on a Unit-produced Basis and start clawing it back should be no more than $4.5 Billion. At least that’s what my calculations tell me. I could be wrong. Nevertheless, I’m using those numbers (Total frames to Break Even and Max Cost until Break Even) as a standard to alert me that something may have gone wrong should Airbus exceed them.

        • Jimmy: May I ask how you make those calculations? I’d be very glad if you could explain which sources are publicly available, which assumptions that are used, and so forth.

          For reference, from Boeing’s SEC Filings, Form 10-Q (p. 13), one can read that the deferred cost of the 787 program increased during 2014H1 by $2,622 million, i.e. on average $54.6 million per 787 delivered. That is after 160 frames delivered and with production at a full 10 frames per month, albeit with a surge line in Everett. Nevertheless, given estimated sales price of around $110 million, production costs are still 50% higher than the cost required for cash-flow break-even. Airbus reaching A350 program cash-flow break-even at 100 frames seems to me almost beyond the realm of the possible. – Thanks.

          • Looks like Boeing also books cost into inventory items. ( this was visible in the initial pile up of frames and the associated rise in numbers for inventory value ).
            Ostrower once reported that the first ~400 frames were sold at an average of ~$87m
            ( sans engines ).
            Distinguishing for the 787 is production and production rate increases while the production process still has distinct (imho massive ) issues. This is very expensive. Effort and cost for fixing things rises exponentially from front to back of a project. Best practice is fix early and don’t go into unfixed territory.

  7. I think after all the discussions regarding discounts, the shear number of orders is becoming less and less significant. One well placed order for a widebody creates the same profit (money left after recurring costs deducted) as 20 single aisles sold at record low prices.
    In some occasions, less orders could mean more profit …

  8. Absolutely lovely to see the disclosure of information on http://www.cseries.com and to hear that they now deem that flight tests can continue. The damaged FTV1 is being repaired and is projected to fly again before the end of the year. Even if EIS were to be delayed by, say, 6 months, I don’t feel it will matter greatly within the large scope of the program as long as visible and credible progress is being made toward certification. Ultimately great planes will always soar across the skies. I wish Bombardier all the best.

    • I agree. I like the aircraft and its segment.

      I do worry about P&W and their ability to deliver. However they also are actually more a consortium with MTU and the Japanese entity of the V2500 so they have backup (and MTU makes part of the GTF)

      I wonder if they are not more a figure head these days and turn over the real tech issue to those other firms?

      Air Force wonders as well I am sure!

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