Airbus order tally explodes higher (OTCMKTS: EADSF)

In a previous report, I showed that The Boeing Company (BA) could emerge as the winner of a somewhat sluggish Farnborough International Airshow in July. However, I also pointed out that Airbus did not really have to come with a big influx of orders during the airshow since he had already secured a big order from China, which would likely allow the European jetmaker to stay ahead in the annual battle for orders.

In this report, I discuss orders, deliveries, cancellations and other changes to Airbus’ order book in July, showing how Airbus had an extremely strong month despite weak momentum during the airshow. In order to obtain a comprehensive overview with capabilities to access the finer details, The Aerospace Forum has developed data analysis solutions for large aircraft manufacturers that will be used in this report. With these tools we are able to analyze orders and deliveries and see where manufacturers are falling short, meeting or exceeding expectations.

China gives a wing to the controls of Airbus

During the month, Airbus booked 401 orders, a sequential increase of 323 units. A total of 399 single-aisle aircraft have been ordered as well as two jumbo jets:

• American Airlines (AAL) has ordered four Airbus A321neos.
• Jet2 has exercised options on three Airbus A321neos.
• Spirit Airlines (TO REGISTER) has ordered five Airbus A321neos.
• An unidentified customer has ordered ten Airbus A321neos.
• Turkish Airlines orders 2 Airbus A350-900s
• Farnborough Airshow Order: Delta Air Lines (DAL) exercised options on 12 Airbus A220-300s.
• Order from the Farnborough Airshow: easyJet (OTCQX:EJTTF) has ordered 56 Airbus A320neos.
• Farnborough Airshow command: LATAM Airlines Group (OTCPK: LTMAQ) has ordered 17 Airbus A321neos.
• China Southern Airlines has ordered nine Airbus A319neos, 23 Airbus A320neos and 64 Airbus A321neos.
• Air China has ordered five Airbus A319neos, nine Airbus A320neos and 50 Airbus A321neos.
• Shenzhen Airlines has ordered 18 Airbus A320neos and 14 Airbus A321neos.
• China Eastern Airlines has ordered 32 Airbus A320neos and 68 Airbus A321neos.

In July, as expected, sales momentum improved further, helped by almost 300 orders from China, covering almost 75% of the order flow, while announcements from the Farnborough International Airshow accounted for almost 20 % of order flow. Thus, a rather weak airshow was offset by strong sales momentum in China and this is something the European jetmaker already knew before the start of the airshow in mid-July.

During the month, the following changes were made to the backlog:

• Azul (AZUL) has converted orders for 13 Airbus A320neos into 13 Airbus A321neos.
• JetSmart has converted an Airbus A320neo order to an Airbus A321neo order while 6 of its orders are now assigned to the undisclosed customer category.
• LATAM Airlines Group has converted orders for five Airbus A320neos into five Airbus A321neos.
• easyJet has converted orders for 18 Airbus A320neos into orders for 18 Airbus A321neos.
• SMBC Aviation Capital Group has converted orders for three Airbus A320neos into orders for three Airbus A321neos.
• Ethiopian Airlines has converted orders for four Airbus A350-900s to orders for four Airbus A350-1000s.
• BOC Aviation has been identified as a customer for 6 Airbus A320neos.
• Bocomm Leasing has been identified as a customer of an Airbus A320neo.
• Bocomm Leasing has been identified as a customer of an Airbus A321neo.
• China Express Airlines has been identified as the customer for an Airbus A320neo.
• Qingdao Airlines has been identified as the customer for an Airbus A320neo.
• Etihad Airways has been identified as a customer for 7 Airbus A350Fs.
• Airbus has canceled orders for four Airbus A350-900s destined for sanctioned Aeroflot.

During the month, we saw some typical conversions as lessors and airlines aligned their orders with their fleet needs by taking advantage of the contractual flexibility offered by Airbus. The cancellations came only from Aeroflot. The cancellation of four Airbus A350s was initiated by Airbus to comply with sanctions against Russia and allow the European aircraft manufacturer to remarket delivery slots.

In July, Airbus booked 401 gross orders worth $22.2 billion, while it removed 4 orders worth $622.4 million from the books, bringing net orders to 397 orders worth $521.5 billion. A year ago, Airbus recorded two orders and seven cancellations, bringing its net orders to -5 units with a negative value of $231.7 million. So we see that order intake has increased significantly year-on-year.

Year-to-date, the European aircraft maker has recorded 843 gross orders and 187 cancellations, bringing net orders to 656 units with a net order value of $17.2 billion. In the first seven months of 2021, Airbus recorded 167 gross orders and 33 net orders with a net value of $2.1 billion. So we see that Airbus is having a much better year so far with improved net order quantities and value.

Airbus Deliveries reflect supply chain stress

In June, Airbus delivered 46 aircraft compared to 59 the previous month. The European jet manufacturer delivered 40 single-aisle jets and 6 jumbo jets with a combined value of $3.0 billion:

• Airbus delivered five Airbus A220s, all five were the largest -300 model.
• A total of 35 Airbus A320neo families have been delivered, consisting of one Airbus A319neo, 14 Airbus A320neos and 20 Airbus A321neos.
• Airbus has delivered an Airbus A330-300.
• Five Airbus A350s were delivered, all -900 models.

In July, shipments declined sequentially, but this was not completely unexpected, as the surge in shipments in June was due to the quarter-end push to make shipments and cash before the end of the quarter. Deliveries of the Airbus A320neo program remain largely disappointing and this is due to supply chain disruptions which simply do not allow Airbus to build and deliver at the targeted rate of 45 aircraft per month.

Compared to last year, shipments decreased by one unit while the value of shipments decreased by $0.3 billion. Year-to-date, Airbus has delivered 343 aircraft worth $22.8 billion, compared to 344 aircraft worth $22.3 billion last year. Year-to-date figures show that Airbus has lost the lead in deliveries compared to last year, while the value of deliveries has only increased by 2%.

The order-to-bill ratio for the month was 8.7 and 7.4 in terms of value, which are good numbers showing the strong influx of orders during the quarter but also reflecting the low number of deliveries. For the first seven months of the year, the gross order intake ratio is 2.5 in terms of units and 2.1 in terms of value.

Conclusion: Airbus Stock is a long-term buy despite delivery headwinds

The July order and delivery numbers haven’t changed my view of Airbus. Last month, I had already predicted that Airbus would reduce its delivery target and it actually happened. The current tension in the supply chain simply does not provide any solid foundation to achieve targeted production and delivery levels, and while this is unfortunate, it is a reality facing the industry and the numbers of order provide a solid horizon for improving production rates in the coming years as supply chains are expected to relax.

So I continue to like Airbus shares and I continue to be invested in the company. Sales exploded in July, adding 90% to the number of orders this year so far this year, and while near-term delivery profiles are disappointing at best, orders are clearly showing strong demand and a basis for future performance.