Boeing smokes Airbus at Farnborough Airshow

The Farnborough Airshow returned last week, representing the aviation industry’s biggest event since the start of the COVID-19 pandemic. Boeing (BA -2.01%) and Airbus (EADSY -0.07%) generally use the biennial meeting to negotiate and announce major aircraft orders.

Airbus had a calm week, with few order announcements. Meanwhile, Boeing has unveiled more than half a dozen offers, including an order for 100 737 MAX 10s from Delta Airlines.

Thanks to this order momentum, Boeing stock gained 7% last week, beating the market. But while the US aerospace giant secured a major win at Farnborough, it still faces immense challenges in the commercial aircraft market, primarily due to its narrow-body aircraft portfolio that is inferior to that of ‘Airbus.

No big splashes for Airbus

Airbus announced three orders last week. First, Delta completed its A220 backlog with 12 additional firm orders. Second, easyJet has confirmed orders for 56 A320neo Family aircraft. Third, LATAM Airlines has ordered 17 additional A321neos.

Thus, Airbus announced orders for only 85 jets during the Farnborough Airshow. Moreover, EasyJet had announced its order a month ago and was only waiting for shareholder approval to confirm it. Nonetheless, Airbus executives maintained a confident tone, saying they were primarily using the airshow to talk to suppliers about bottlenecks hampering production rather than focusing entirely on signing major new orders. with airlines and leasing companies.

Boeing goes big

Unlike Airbus, Boeing’s commercial team had a busy week. In addition to the big order from Delta Air Lines, Boeing on Monday officially announced a previously unidentified order from Japan’s ANA Holdings for 20 737 MAX planes.

The next day, Boeing announced three orders. Miami-based investment firm 777 Partners, which has stakes in various low-cost airlines around the world, has placed a firm order for 30 high-density 737 MAX 200s. Aircraft rental giant AerCap ordered five more 787-9s. Finally, Aviation Capital Group has placed an order for 12 additional 737 MAX 8s.

Later in the week, Boeing said Qatar Airways had confirmed an order for 25 737 MAX 10s, finalizing a memorandum of understanding announced in January. He also signed a memorandum of understanding with Azerbaijan Airlines for four 787-8s and revealed that Cargolux had selected the new 777-8 freighter as a possible replacement for its 747-400 freighters.

A rendering of a Boeing 737 MAX 10 flying over snow-capped mountains.

Image source: Boeing.

In total, this activity gave Boeing 172 firm orders for the week (including the confirmed agreement with Qatar Airways), as well as the commitment of four planes from Azerbaijan Airlines. That would nearly double the company’s year-to-date total orders, after registering 205 net firm orders in the first half of 2022.

Win the battle but lose the war

Boeing’s “victory” at Farnborough was an important step in the right direction. That said, Airbus recorded 259 net firm orders in the first half of the year, surpassing Boeing’s 205. So even after signing significantly more orders last week, Boeing has only a modest year-to-date lead.

Additionally, Airbus just a few weeks ago received commitments for a total of 292 aircraft from several major Chinese airlines. If those are firmed up later this year, Boeing will face an uphill battle to maintain its lead in the 2022 race to command.

More importantly, Airbus has thousands more orders in its backlog than Boeing, with narrow-body jets accounting for all the disparity. Boeing is far from reaching parity with Airbus, and that fact won’t change any time soon.

Boeing’s smallest commercial aircraft, the 737 MAX 7, cannot effectively compete with Airbus’ A220 family, which is purpose-built for the 100-150 seat market. Meanwhile, neither the 737 MAX 9 nor the 737 MAX 10 can match the range and airfield performance of the A321neo (especially its longer-range variants).

Even with reduced market share and production, Boeing should be able to make a decent profit over the next few years. However, the company will need to devote many years of free cash flow to repairing its fragile balance sheet. Meanwhile, Airbus has an impeccable balance sheet and is poised for significant growth as supply chain constraints ease. This makes Airbus shares a much more attractive investment than Boeing shares.

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