Updating Airbus and Boeing Orders At Risk

Subscription Required By Vincent Valery Introduction   Nov. 23, 2020, © Leeham News: It’s time to update the analysis on Airbus and Boeing orders at risk for delivery under the “weak customer” doctrine. Under a US accounting rule known as ASC 606, Boeing must identify the number of orders that are unlikely to be delivered because the customer’s financial condition is weak. Airbus does not do this because there is no ASC 606 rule in Europe. LNA wrote a few months ago an article that attempted to apply ASC 606 adjustments to Airbus' order book. Boeing publishes an estimation by the program of orders subjects to material cancellation risks, or ASC 606. The tally increased from 183 to 782 for the 737 between the end of 2019 and October 2020. While Boeing has disclosed 1,020 net orders year-to-date canceled or subject to ASC 606 (393 canceled without accounting for ASC 606 adjustments), Airbus lists 308 net new orders. Airbus' tally does not reflect a European equivalent to ASC 606 adjustments. The European OEM only publishes an overall outstanding value of its order book that accounts for customer risks in its annual report. Despite last week's news about progress on developing a COVID-19 vaccine, LNA’s Judson Rollins wrote that the timeline of a return to normalcy remains elusive. The lingering pandemic means that more airlines will run into financial difficulties, resulting in more orders that will be deemed risky. LNA provides an updated tally of the orders at risk for both Airbus and Boeing, with minor changes to the methodology.
Summary
  • Identifying customers at risk;
  • Explaining differences with Boeing's ASC 606;
  • Applying adjustments to Airbus' order book;
  • Estimation of adjusted market shares;
  • A digression to tariff exposures.

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