Airbus and Boeing finish 2020: different stories and signs of trouble
While Boeing had its hands full with the Boeing 737 MAX crisis, Airbus had a record 2019 in terms of deliveries after a frantic December. 2020, was a year of a lot of highs and lows for both, including troubling signs for the pair.
All in all, Airbus delivered 556 aircraft, while Boeing handed off 157 jets to its customers.
All according to plan
The Toulouse, France-based manufacturer noted that the 556 deliveries, coming short of the 863 deliveries completed in 2019, was in line with its “adaptation plan set out in April 2020 in response to the COVID-19 pandemic.”
Airbus’ most-popular products have remained the narrow-body families, in particular the A320 aircraft family. The company delivered 10 A220-100s, 28 A220-300s, three A319ceo and A320ceo, respectively, and nine A321ceo. The new engine option (neo) A320s and A321s were once again the hottest products in Airbus lineups, as the manufacturer shipped off 253 A320neos and 178 A321neos to airlines across the globe. In total, customers accepted 484 narrow-body aircraft – 206 fewer than compared to a year prior, when Airbus completed 690 single-aisle deliveries.
On the wide-body front, though, the numbers are mellower. 19 Airbus A330 and 59 Airbus A350 aircraft were delivered, including four A380s to Emirates, totaling 83 wide-bodies – a number that is more than 50% lower than in 2019 (173).
The European aircraft manufacturer indicated that it received 268 net orders throughout the year, accounting for 115 cancelations. Its backlog stood at 7,184 aircraft, 298 fewer than at the end of 2019. At the same time, its production numbers were also re-adjusted according to current demand – the manufacturer now produces four A220, 40 A320 family aircraft, two A330 and five A350 aircraft per month.
While the narrow-body planes and the Airbus A350 have a healthy order book, the biggest struggle for Airbus will be the situation of the A330. In total, the manufacturer has 298 A330 on order, including 16 A330-200 and eight A330-300.
The A330neo, unfortunately, was not the blockbuster that Airbus could have expected it to be. Pushed by AirAsia to re-engine the A330, almost 25% of the A330neo’s backlog was held by the Malaysian low-cost carrier. However, financial issues have crippled the airline and it has seen its debt grow massively over the years. Adding in the current downturn in travel to the mix meant that AirAsia X, the long-haul arm of AirAsia, was forced to restructure its debt. While, according to the latest reports, the majority of the carrier’s lessors are in support of the plan, and the company has received interest from potential investors to raise funds, some are not happy.
BOC Aviation, an aircraft leasing company, and airport operator Malaysia Airports Bhd has called AirAsia X “hopelessly insolvent,” while Airbus filled an affidavit that it could lose up to $5 billion in aircraft orders if the restructuring plan does proceed.
If AirAsia X does restructure its debt and leaves Airbus’ orders behind, nearly 25% of outstanding A330neo orders would be wiped out. Add in the uncertainty of orders hailing from Iran Air, as Iran is currently under strict economic sanctions, and the new engine option wide-body has more than a third of its backlog empty. Throughout 2020, airlines have canceled 17 orders for the A330 family: three A330F, six A330-300 and seven A330-900neo orders were removed from Airbus’ order book. If worst comes to worst and the manufacturer would eventually lose AirAsia X’s order, that would leave it with 252 A330neo deliveries remaining (12 A330-800 and 240 A330-900, excluding two units that were already shipped to AirAsia X). At a production rate of two aircraft per month, questions of the program’s profitability can be raised, if such a low production number is sustained for a long period of time. Customer demand for the aircraft currently can be questioned as well, as, for example, Airbus was even able to deliver an A330 Multi Role Tanker Transport (MRTT) ahead of schedule to the French Ministry of Armed Forces in July 2020.
Wide-body aircraft are not particularly in vogue at the moment, as demand for international air travel has remained in tatters. On the other hand, the fact that Airbus has delivered over 1,400 A330ceo aircraft to customers could indicate that as they get older, the A330neo will be the perfect replacement for them due to the ceo/neo commonality.
Struggling wide-body aircraft
On the other side of the Atlantic Ocean, Boeing was also wrapped up in its own trouble. While by the end of 2020 it had finally begun to deliver the ill-fated 737 MAX since it was grounded in March 2019, the Orders and Deliveries numbers also showcase troubling signs.
Over the course of the year, Boeing delivered 157 aircraft to customers. Of those, 43 were Boeing 737 aircraft including two 737-800 NextGeneration (NG) and 14 P-8 Poseidon military aircraft, while the remaining jets were wide-bodies: 747 (five deliveries), 767 (30), 777 (26) and 787 Dreamliners (58). From the US plane maker’s perspective, the 737 MAX and the 787 are absolutely crucial to their businesses, as the 747, 767 and 777 are now primarily delivered as cargo aircraft. Simply put, the demand is not the same – in its most recent market outlook, Boeing predicted that airlines would require 7,480 new wide-body aircraft by 2039, while the demand for new cargo wide-body aircraft would stand at only 980.
In the wide-body segment, passenger aircraft deliveries, excluding the 787, were few and far between. The 747-8 and 767 were delivered as either a freighter or in the case of 767, designated as the KC-46, as a mid-air refueling aircraft. Out of the 26 Triple Seven deliveries, six were destined to carry passengers and not freight, planespotters.net data shows. By the end of the year, Boeing 787 deliveries had slowed down, as the manufacturer faced production issues that forced the company to review its whole supply chain in order to rectify the issue. In Q4 2020, customers received only four Dreamliners.
There is little hope that the Boeing 777 would gain much traction in terms of sales to passenger airlines. Coupled with the international travel downturn, the 777X is around the corner. Seemingly for Boeing, the goal is to have enough freighters to produce to continue running the production line until the folding wing-tip wide-body is certified and can be delivered to customers. In a recent interview, Emirates President Tim Clark indicated that the delivery date could slip to as late as 2023 or even later.
“It is a question of when that aircraft is going to be completed and certified and offered for entry of service. That could be ‘22, could be ‘23, it could be even longer,” the executive told Reuters on January 13, 2020. According to Boeing’s data, the manufacturer has 58 unfilled orders for the 777 family, excluding the 777X. In July 2020, the company reduced the aircraft’s production rate to two per month, effective 2021, as Boeing indicated that the 777X would see the light of the day in 2022.
The 737 MAX, which directly competes with the Airbus A320neo, represented a segment of the market that was very popular amongst airlines. Carriers were very keen to order either, which resulted in massive backlogs of aircraft that airlines had to wait for years for their orders to come to fruition.
So much so, that at the end of 2018, the Boeing 737 MAX had more than 5,000 net orders. By the end of 2020, the number now stands at 3,321, despite the fact that the company delivered 84 MAX aircraft between January 1 and December 31, 2020. Cancelations were rampant, as in 2020 alone, Boeing has lost more than 1,000 orders for the troubled narrow-body. With the various penalties related to the delivery contracts with its customers, including now the current downturn in business due to the pandemic, every order was crucial.
Nevertheless, Boeing managed to end the year with a positive note for the 737 MAX, as the Federal Aviation Administration (FAA) finally paved the way for the aircraft to return to commercial service. On December 29, 2020, American Airlines (A1G) (AAL) became the first US-based airline to fly the MAX since March 2019, joining a short, yet growing list of operators that at the time also included Aeromexico and Brazil’s GOL Linhas Aereas.
The manufacturer also managed to find a customer, as Ireland’s Ryanair firmed up its options and increased the total order it had from 135 to 75 Boeing 737 MAX aircraft, one of the few airlines to order the aircraft within the period of its groundings. Another notable deal was Boeing shaking hands with International Airlines Group (IAG) (IAG) for a Letter of Intent (LoI) of up to 200 jets. Whether the LoI will materialize into a firm remains to be seen.
At the same time, the 737 MAX was still a double-edged sword. Despite getting it back in the air and gathering significant momentum in terms of sales, other civil aviation authorities across the globe have been hesitant to un-ground the aircraft. The European Union Aviation Safety Agency (EASA), for example, has outlined its differences and is yet to un-ground the 737 MAX, despite issuing a Proposed Airworthiness Directive (PAD) in late-November 2020.
Scrutiny and outlook
Furthermore, US lawmakers heavily scrutinized Boeing in relation to the 737 MAX. Most recently, the US Department of Justice (DoJ) charged Boeing for withholding information from the Federal Aviation Administration (FAA).
“The tragic crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 exposed fraudulent and deceptive conduct by employees of one of the world’s leading commercial airplane manufacturers,” read a statement by Acting Assistant Attorney General David P. Burns of the Justice Department. A new bill, aimed to improve the commercial aircraft certification process, was also introduced in November 2020, when the US House of Representatives passed the Aircraft Certification Reform and Accountability Act.
“I’m proud we are taking this important step today to fix the broken system that allowed Boeing to put profits over safety and push a flawed airplane through the regulatory process, ultimately leading to the deaths of 346 innocent people,” stated the chairman of the committee Peter DeFazio.
And the two-tone story should continue in 2021, as the duo looks to ride out the current crisis on different levels. For Airbus, its largest headache will be the financial situation with AirAsia X and the future of its A330neo program. The European manufacturer will look to channel its inner Formula 1 driver and lift and coast while stomping the accelerator pedal when a gap opens up. Boeing, meanwhile, will look to once again stand on its feet and do so quietly with as few ground-breaking headlines as possible. Avoiding any incidents with the 737 MAX and rectifying the issues with the 787 Dreamliner production will be crucial, as Boeing’s reputation has been more akin to a skier, rather than an aircraft, throughout the past few years. The backbone for the company will be the deliveries of the 737 MAX, which has deprived Boeing of crucial cash since March 2019 and has shaken the company’s finances and, of course, reputation to its core.
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