July 29, 2019, Leeham News: Despite threats and fears of cancellations for the Boeing 737 MAX following two fatal accidents of virtually brand new -8 MAXes, few order cancellations directly attributable to the crashes have occurred.
So far, there isn’t a discernible shift to Airbus, either, data shows.
Garuda Indonesia Airlines officials said after the Lion Air and Ethiopian Airlines crashes that it would cancel an order for nearly 49 MAX 8s. Although news emerged that the airline was swapping 8 MAXes for 10 MAXes and Boeing 787s, the OEM’s website (as of June 30) still shows the 49 airplanes ordered by the carrier.
Boeing’s website does show a loss of 85 orders due to “contractual changes,” 49 orders lost net of cancellations and conversions and another 131 subtracted for ASC 606 accounting rules. The latter relates to orders with questionable credits, as explained here. Boeing also offers this explanation on its website: ASC 606 “imposes additional criteria for recognizing contracted backlog with customers beyond the existence of a firm contract to deliver.”
India’s Jet Airways, which ceased operation months ago, had 125 MAX orders. These are still shown on Boeing’s website.
The number of MAX cancellations, swaps and ASC 606 deductions amounts to fewer than 200 airplanes out of a backlog of some 4,500.
The Paris Air Show ended with no firm orders for the MAX but a Letter of Intent for 200 was announced by International Airline Group, the parent of British Airways, Iberia, Aer Lingus and two other carriers.
Airbus ended the show with several hundred A320neo and A220 orders and commitments. Not all have been booked into firm orders.
The Airbus and Boeing websites track only firm orders. Accordingly, the information today is based on firm orders, not including Options, LOIs and MOUs.
When LNA analyzed the market shares last year, Airbus had 57% of the A320neo-737 MAX order race. This remains true in this examination.
When the A220 and, on a pro forma basis, the Embraer E190/195-E2 are included in the Airbus and Boeing single-aisle market share analysis, and the Irkut MC-21 and COMAC C919 firm orders are included, Boeing’s market share drops to 39.6% of the 100-220 seat sector. Airbus drops to 55.8%. Irkut and COMAC capture 4.6%.
This, too, is largely unchanged from last year’s analysis.
The underlying question remains, however: will Boeing begin to lose market share for its most profitable airliner?
Cancelling orders can be costly. If the planes are grounded for a year, aerospace analysts believe customers can cancel contracts with little or no penalty, but LNA hasn’t confirmed this. Order swaps and compensation are more likely.
But will new campaigns trend toward Airbus?
Buckingham Research Group thinks so.
In a July 11 research note, the aerospace analyst wrote:
Boeing’s flight control system design philosophy could drive share loss. The Airbus flight control system gives the autopilot far more authority over aircraft functions versus BA. BA’s system puts more control in the hands of the pilot – hence Boeing aircraft are considered a “pilot’s airplane”. For developing world airlines, the Airbus system might be better suited and more attractive as pilot skills in the developing world may not be on par with those of the developed world. The long-term impact to the MAX brand may be that developing world customers prefer the A320neo vs. the MAX. If we’re correct, a key metric to watch after the MAX returns to service will be orders and option conversions for the MAX 8 vs. the A320neo.
LNA has confirmed that key players in the industry agree with the thesis that the A320 may be the better airplane for the developing world.