Over the past few years, Boeing has typically trailed its top rival Airbus in terms of bringing in aircraft orders. This has been a recurring concern for investors.
However, Boeing may be able to snap its losing streak this year. With the first quarter in the books, Boeing is far ahead of Airbus in the order race for 2017.
Boeing starts 2017 on a tear
Order activity has been slowing across the aerospace industry since 2014, driven by a combination of buyer fatigue after several years of strong orders, economic weakness in certain markets, and lower fuel prices (which made it less urgent to replace older planes). Last year, for the first time since 2009, Boeing failed to sell as many planes as it delivered.
As a result, Boeing entered 2017 with fairly modest sales expectations for the year. On the company's January earnings call, CEO Dennis Muilenberg said that Boeing would probably capture a similar number of net orders to the 668 it brought in during 2016.
So far, Boeing has had no trouble finding buyers for its planes. Last week, it reported that it received 198 net orders during Q1. This was far ahead of the 121 net orders it logged in the first quarter of 2016.
As always, the 737 family led the way, with 167 net orders: 70 for the current version and 97 for the upcoming 737 MAX. Boeing also received 15 orders for the 767 as part of the U.S. Air Force tanker program and 11 orders for the 787 Dreamliner. Most importantly, the struggling current-generation 777 won nine orders last quarter. This will help Boeing avoid any further production cuts beyond what it has already announced.
Of note, Boeing's Q1 order activity did not include the company's previously announced deal with Singapore Airlines for 39 wide-bodies. That order hasn't been finalized yet.
While Boeing's Q1 order performance was all the company could have hoped for and more, Airbus had an extremely quiet quarter. In fact, as of the end of February, it had more cancellations than orders for the year.
During March, Airbus at least managed to get back into positive territory. The company ended Q1 with just six net orders year to date, consisting of nine net orders for the popular A320 narrow-body family and three orders for the A350 wide-body, offset by four A330neo cancellations and two A380 cancellations.
The A330neo and A380 cancellations were widely expected. However, they hit Airbus' two weakest products. The A380 backlog continues to shrink and Emirates seems to be the only airline truly committed to the jumbo jet. Meanwhile, the A330-800neo is down to just six orders from a single customer, making it doubtful that Airbus will proceed with development. Thus, the A330neo "family" may end up having just one member: the larger A330-900neo.
It's still early
Clearly, Boeing had a strong start to 2017, while Airbus did not. However, it's way too early for Boeing executives -- or investors -- to take a victory lap. Aircraft orders tend to come in spurts, and three months isn't a very long time. Airbus could catch up in a hurry if it reels in two or three big deals.
Furthermore, Airbus is still well ahead of Boeing in terms of its total order backlog. As of the end of March, Airbus had 6,744 unfilled airplane orders, exactly 1,000 more than Boeing.
These massive backlogs mean that Boeing and (especially) Airbus have most of their production locked in for the next decade. For now, they should focus on filling in the remaining gaps relative to their production plans. Boeing did a great job in that respect last quarter.
(Adam Levine-Weinberg - The Motley Fool)