MIAMI — The Boeing Company announced a 5.5% decline in commercial aircraft deliveries for the third quarter (Q3) of 2016, potentially sending a worrisome signal in advance of the carrier’s Q3 results, which will be announced on October 26.
For the quarter, Boeing delivered 188 aircraft, consisting of 120 737NG aircraft, five 747s, five 767s, 22 777s, and 36 787s. For the year to date (YTD), Boeing has now delivered 368 737s, eight 747s, 10 767s, 73 777s, and 104 787s for a total of 563 aircraft delivered.
One year ago, Boeing delivered in Q3 126 737s, four 747s, five 767s, 27 777s, and 37 787s for a total of 199 deliveries. The 2015 YTD delivery figures consisted of 375 737s, 13 747s, 14 767s, 77 777s, and 101 787s for a total of 580 deliveries.
Meanwhile, rival Airbus delivered 136 Airbus A320 family aircraft (including 16 A320neos), 12 A330s, 14 A350s, and 2 A380s for a total of 164 deliveries in Q3. YTD, Airbus has delivered 462 aircraft, consisting of 380 A320 family planes (24 A320neos), 40 A330s, 26 A350s, and 16 A380s.
737 and 777 Deliveries Fall and Impact Cash Flows
The year-over-year (YOY) decline was largely driven by two programs, the 737 Next Generation and the 777, which saw YTD declines of more than 5% (and thus drove the overall number upwards). This makes sense as both programs are in transition as the 737 surges towards the entry into service (EIS) for the 737 MAX next year with Southwest Airlines and the 777X’s development program continues apace.
So the reasons behind the delivery decline are understandable to say the least. Unfortunately, the 777 and 737 are also Boeing’s cash (flow) cows. As the only two Boeing programs that have fully paid off their development costs, the 737 and 777 are the primary contributors to Boeing Commercial Airplanes’ cash flow. The fall in those deliveries is thus bad news for Boeing’s cash flow and finances over the next couple of years.
Boeing is now a 787 driven company, and while it may have structured the paper profits to show positive results, it will take a while for the cash flows to even out.
Boeing and Airbus pull even in net orders as Airbus wipes Kingfisher off the books
After September, Boeing and Airbus are exactly tied in terms of YTD orders at 380 apiece. This is a big switch from the totals at the end of August, where Airbus held a 438 to 355 lead over Boeing after its resounding victory in the order battle at July’s Farnborough Airshow, and is largely driven by the cancellation of 102 orders previously held by defunct Indian airline Kingfisher Airlines.
Though Kingfisher technically exists as a business entity in India to this day, it has functionally been out of business since October of 2012, when it had its flying license suspended by the Directorate General of Civil Aviation (DGCA – India’s version of the FAA). So truthfully, this is an order than has been all but lost since 2012, and is only now being wiped off the books (the order was for a mix of A320s, A350s, and A380s). Functionally, it doesn’t say much about the current year performance of Airbus and Boeing, as it is an order that has long been lost.
Boeing out-delivered Airbus once again in Q4 and still leads YTD, but this is mainly a pyrrhic victory. Airbus’ overall and particularly its narrow body backlog is much larger than that of Boeing, and fundamentally that is the most important metric when thinking about what Boeing’s future will hold.
Airbus merely ramping up A350 deliveries to match those of the 787 will narrow most of the gap, as will Boeing’s continued production cuts on the 777 Classic (which we expect to dip to 60 aircraft produced per year by the time of 777X EIS).
Still, Boeing will probably retain a slight advantage in wide body deliveries through the early 2020s, which will be more than offset by Airbus’ strong advantage in the narrow body segment.