Jan. 11, 2015, © Leeham Co.: Boeing out-delivered Airbus last year by a wide margin. Airbus obtained more orders than Boeing by a wide margin.
Behind our paywall today, we look at some of the reasons for this as we update our annual production forecast. The principal reason Boeing out-delivered Airbus is that production for the 787 is going full blast and production for the A350 is only beginning to ramp up. By 2018, we forecast Airbus will slightly surpass Boeing in production and therefore deliveries.
With Boeing trailing Airbus dramatically for orders this year, an old refrain has resurfaced from years ago when Airbus began outselling Boeing. Phil Condit, then the CEO of Boeing, dismissed the Airbus gains by saying orders don’t matter, only deliveries matter. There have been a few similar statements in recent times.
The reason this is silly is really quite basic: without orders, there won’t be deliveries.
The situation today is, of course, very different than it was during Condit’s era.
The backlogs then were far smaller than they are today, and if memory serves, at the time Condit made his statement, Boeing had the greater backlog.
What Boeing officials today are really saying is that their greater number of deliveries means more revenue, more cash flow and presumably greater profits than Airbus is pulling in.
In this context, the statement is true.
The fact that Airbus and Boeing each have backlogs of more than 5,000 airplanes does make reliance on orders less important in any given year, when economic and sales cycles might occur.
While some analysts and institutional investors worried whether Boeing would achieve a 1:1 book:bill last year (it did, barely), we shrugged off the concern. With the record-setting backlogs extending to 2020 and beyond for the 737 and 787, our view was, “Who cares?” if the book:bill didn’t hit one in 2015. The same is true this year. (Boeing will give guidance on its Jan. 27 earnings call.)
The same philosophy applies to Airbus. Although Airbus looks like it could be close to a 2:1 book:bill (final data will be revealed tomorrow at the annual Airbus post-year press conference), we would have been unconcerned if Airbus fell short.
Equally, there is constant hand-wringing over the possibility of cancellations or deferrals as economies change. With oversales a feature of the huge backlogs, some cancellations and deferrals will actually relieve the pressure off the OEMs and the supply chain.
Our somewhat cavalier attitude drives some of our aerospace analyst followers crazy. So be it.