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Boeing and Airbus Batten Down COVID-19 Hatches Awaiting Better Days By Howard Wheeldon, FRAeS, Wheeldon Strategic Advisory Ltd.

 

 

 

 

It has been something of an awful irony that between them Boeing and Airbus managed to sell just one new aircraft in June and at that, a cargo aircraft from Boeing as opposed to being a commercial passenger plane. 

Between them, according to Flight Global, and Cirium, Airbus and Boeing have apparently accumulated more than 628 completed new aircraft awaiting to be delivered. Boeing’s inventory stands at 462, although 423 of those are grounded 737 MAX aircraft. The MAX cannot be delivered until regulators have lifted the regulatory grounding that was put in place in March 2019. The remainder of the undelivered planes are widebody jets, including 31 787s, five 777s, one 767, and two 747-8Fs.

 

 

The Airbus stockpile of 166 undelivered jets (145 at the end of June) includes 11 A220s, 112 A320-family aircraft, 14 A330s, 25 A350s, and four A380s. A large number of the A320s are parked in the German cities of Erfurt and Rostock until the customers can finally take delivery.

Not all of the aircraft are a result of delayed deliveries. There is always sometime between the first flight and delivery to the customer. According to Flight Global Airbus has 40 planes that only made their first flight this month, while Boeing apparently has just five.

Airbus has cut the production of narrow-body planes from 60 to 40 per month, while A330 production has been reduced from 3.5 to two per month, and A350 from 9.5 to six monthly. Boeing has cut 777 output by half to 2.5 per month and reduced 787 production from 14 to 10 with a further cut seven per month by 2022. Boeing is now producing 737 Max aircraft at an undisclosed low rate but expects to gradually increase the production rate to 31 aircraft per month by the beginning of 2022. 

Airbus has said that it expects 2020 and 2021 production and deliveries will be 40% down on original plans and the company has slashed single aisle production from 60 to 40 jets monthly, A330 aircraft from 3.5 aircraft per month to two and A350 production from 9.5 to six aircraft per month.

Including EUR 276 million of provisions relating to the planned discontinuation of A380 aircraft Airbus has taken a EUR 299 million charge for impairment of inventories considered at risk. In respect of its first half period results to 30th June, Airbus reported revenues of EUR 18.9 billion of which Airbus Commercial accounted for EUR 12.5 billion (down by 48% on the same period last year) defence accounted for EUR 4.5 billion and helicopter EUR 2.3 billion. The company reported an EBIT loss of EUR 1.6 billion and free cash outflow before M&A and customer financing of EUR 12.4 billion of which EUR 4.4 billion occurred in the second quarter.    

For the same period to 30th June Boeing reported revenues of $28.715 billion (down 26%), loss from operations of $4.3 billion, net losses of $3 billion and net free cash outflow of $10.3 billion. The Chicago based company delivered 70 aircraft during the first six months of the year compared to 239 aircraft in the equivalent period last year but told investors that the order backlog of 4,500 planes was valued at $326 billion. Boeing Defense, Space and Security reported first six-month period revenues 4% down on last year at $12,.6 billion although COVID impacted earnings declined by 78% to $409 million.           

“The impact of the Covid-19 pandemic on our financials is now very visible in the second quarter, with H1 commercial aircraft deliveries halving compared to a year ago.” said Airbus CEO Guillaume Faury in the half year statement. He went on to say in the half year statement that “we have calibrated the business to face the new market environment on an industrial basis and the supply chain is now working in line with the new plan. It is our ambition to not consume cash before M&A and customer financing in H2 2020” adding that “we face a difficult situation with uncertainty ahead, but with the decisions we have taken, we believe we are adequately positioned to navigate these challenging times in our industry.”

Separately and addressing his shareholders, Boeing President and CEO Dave Calhoun said “We’re working closely with our customers, suppliers and global partners to manage the challenges to our industry, bridge to recovery and rebuild to be stronger on the other side” adding “the diversity of our balanced portfolio and our government services, defense and space programs provide some critical stability for us in the near-term as we take tough but necessary steps to adapt for new market realities,. We are taking the right action to ensure we’re well positioned for the future by strengthening our culture, improving transparency, rebuilding trust and transforming our business to become a better, more sustainable Boeing. Air travel has always proven to be resilient – and so has Boeing.”

Airbus said that net commercial aircraft orders in the first half period totalled 298 aircraft, including eight during the second quarter. This compares with just 88 aircraft ordered during the first half period 2019. Airbus said that its order backlog at the end of the first half period was 7,584 aircraft compared to an equivalent figure of 7,276 aircraft at the 30th June 2019.

Airbus said that it “delivered 36 commercial aircraft in June 2020, compared to 24 in May and 14 in April, bringing the total to 196 commercial aircraft delivered during the first half of the year (H1 2019: 389 aircraft) – these comprising 11 A220s, 157 A320s, five A330s and 23 A350s.

Boeing has now flown the first three of its new 777X but my understanding is that launch customer Emirate Airlines which has 115 of the type on order will not receive its first aircraft until 2022. However, with test flights started a month ago and with the company having agreed a final list of changes put forward by the US Federal Aviation Authority regulator, Boeing remains confident that it will restart deliveries of the 737 MAX early in 2021.

However, just as Airbus had already announced that it would cease production of the A380 Superjumbo when the current orders are complete Boeing has also announced that it will cease production of the 747-8 jumbo jet in 2022.

CHW (London – 5th August 2020)

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