CA - Airbus Breaks Big Milestone Of $100 Billion In Airplane Orders

2023-12-14 13:01:32 ET

Summary

• Airbus stock shows strong performance, appreciating nearly 13% in November.
• Jet makers face a strong backdrop for airplane orders as supply chain challenges and air travel demand drive up airplane prices.
• Airbus booked 113 airplane orders in November, with a total value of $7.2 billion.

Currently, demand for airplanes is high as demand for air travel supports a growing world fleet, especially after many airplanes were phased out during the pandemic. Additionally, fluctuations in oil prices as well as an inability to supply airplanes in desired quantities have customers lining up to buy airplanes from Boeing (BA) and its European competitor Airbus.

In this report, I will be discussing the order and delivery activity for Airbus SE (EADSF)(EADSY) commercial airplane orders in the month of November.

How Is Airbus Stock Performing?

In my previous report, I observed that despite the outperforming nature of aerospace stocks, Airbus was not showing similar stock price appreciation. In my view, this was mostly driven by the Pratt & Whitney issues . There is a clear battle plan for that now, and new engine deliveries are unaffected. The market has also recognized this with November showing Airbus shares appreciating nearly 13% compared to +8% for the S&P 500. On a year-to-date basis, Airbus stock has returned 28.6% compared to 22.6% for the broader market. Stock prices might also have benefited from order announcements during and shortly prior to the Dubai Airshow.

Airbus Airplane Order News: Dubai Airshow Orders In The Books

Airbus booked a total of 113 airplane orders, down six orders sequentially, with 96 single aisle orders and 17 wide body orders valued at $7.2 billion:

• Aer Lingus, part of International Consolidated Airlines Group (ICAGY), ordered two Airbus A320neos.
• British Airways, part of International Consolidated Airlines Group, ordered two Airbus A320neos and two Airbus A321neos.
• Dubai Airshow Order: Air Baltic ordered 30 Airbus A220-300s.
• SMBC Aviation Capital ordered 60 Airbus A320neo airplanes.
• Air Lease Corporation (AL) ordered one Airbus A330-900.
• Air Mauritius ordered one Airbus A350-900.
• Dubai Airshow Order: Emirates ordered 15 Airbus A350-900s.

During the month, the following changes were made to the order book:

• Aegean Airlines was identified as the customer for five Airbus A321neo airplanes.
• Jet2 was identified as the customer for twelve Airbus A321neo airplanes.
• Air India converted orders for 70 Airbus A320neo airplanes to orders for 70 Airbus A321neos.
• Air India converted orders for 14 Airbus A350-1000s to the same number of the -900 variant.
• ALAFCO cancelled orders for 46 Airbus A320neo airplanes.
• BOCOM Leasing was identified as the customer for two Airbus A320neos.
• Chengdu Airlines was identified as the customer for one Airbus A320neo.
• China Express Airlines was identified as the customer for one Airbus A320neo.
• CDB Leasing converted an order for two Airbus A320neos to two Airbus A321neos.
• Egyptair was identified as the customer for 10 Airbus A350-900s.
• International Airlines Group cancelled orders for four Airbus A320neos and two Airbus A320neos.
• SMBC Aviation Capital Group converted orders for six Airbus A320neos to six Airbus A321neos.
• Xiamen Airlines converted orders for five Airbus A320neos to five Airbus A321neos.

Note from the author: The order data provided by Airbus since October contains an error, as the total orders do not add up. I went through the data and could attribute it to six airplanes missing from the customer list. I have categorized these orders as cancellations, as it is probable that Airbus has not correctly accounted for the cancellation since October.

In November, Airbus logged 113 orders valued at $7.2 billion with 52 cancellations valued at $2.7 billion, bringing the November net orders to 61 units valued at $4.5 billion. During the month there were the usual identifications of orders for Chinese customers, but there also were some noteworthy items. We saw the Air India orders being altered significantly as some orders for the Airbus A350-1000s were converted to orders for the Airbus A350-900 and that rebalancing in the order book does make sense, while the airline also converted orders to the more popular Airbus A321neo. Furthermore, we saw International Consolidated Airlines Group order airplanes and cancel existing orders, which de facto became order transfers from the airline group level to the airline level.

In November 2022, Airbus booked 29 orders and 15 orders after cancellations, with a net order value of $938 million. The difference in net orders can be explained by higher gross orders this year, partially offset by higher cancellations and a better mix. Airbus is having a strong year so far, with 1,512 gross orders and 1,389 net orders with an estimated value of $94.7 billion. By comparison, in the same period last year, Airbus booked 825 net orders valued at $39.4 billion. The difference of 564 orders can be attributed to the order from IndiGo for 500 airplanes earlier this year during the Paris Airshow.

Airbus Airplane Deliveries Fall

In November, Airbus delivered a total of 64 deliveries, comparing less favorable to the 71 jets delivered in the month prior. The delivery mix consisted of 55 narrow body airplanes and nine wide body airplanes with an estimated value of $4.2 billion:

• Airbus delivered nine Airbus A220s.
• Airbus delivered 51 Airbus A320neo family airplanes consisting of 23 Airbus A320neo airplanes and 28 Airbus A321neo airplanes.
• Three Airbus A330 airplanes were delivered consisting of one Airbus A330-200 to be converted to a tanker configuration and two Airbus A330-900s.
• Airbus delivered eight Airbus A350s, all of which were the -900 variant.

The delivery profile showed sequential as well as year-over-year decrease in deliveries. Sequentially, deliveries declined by seven units while year-over-year the decline was four units, driven by the Airbus A320neo airplane program. A220 deliveries increased by one unit while A320neo deliveries dropped five units bringing a decrease of four units for single aisle deliveries while A330 program deliveries dropped one unit offset by a one unit increase in A350 deliveries. Year-to-date deliveries add up to 623 units valued at $40.2 billion, compared to 565 deliveries valued at $37.1 billion a year ago.

To achieve the delivery target of 720 units, Airbus needs to deliver 97 airplanes in December. While steep, I do believe that the company should be able to do this. In November and December last year, the company delivered 166 airplanes and with higher year-to-date deliveries, I think Airbus should be able to reach its delivery target.

For the month, the book-to-bill ratio was 1.8 measured by units, and 1.7 measured by dollar value. The numbers for the first 11 months of the year look even stronger, with a book-to-bill of 2.4x measured by units and a value book-to-bill of 2.5x, reflecting the high order inflow from Indian carriers this year.

What Is Airbus' Delivery Target For 2023?

Airbus expects a total of 720 deliveries this year, replicating its missed delivery target of last year. Given the easing supply chain constraints, Airbus has a significantly higher chance to reach its delivery target, which is just five units shy of the 725 units I expect Airbus to deliver this year.

How Do Airbus Deliveries Compare To Boeing?

In November, Boeing delivered 56 airplanes bringing the year-to-date total to 461 compared to 623 for its European competitor, giving Airbus a 162-unit lead which is a gap that Boeing will not be able to close.

Conclusion: Airbus Depends On December Push For Delivery Target

In November, we saw some of the orders announced during the Dubai Airshow end up in the books. More noteworthy, however, were the order book changes that Air India made to its single aisle and wide body orders while lessor ALAFCO walked away from its order, which was more than compensated for by the order from lessor SMBC Aviation Capital.

In terms of deliveries, we saw a sequential and year-over-year decline in deliveries, but that was not any reason to significantly doubt the European jet maker's ability to reach its delivery target. That delivery target always looks steep going into the final weeks of the year, but I believe Airbus should be better equipped than in previous years to reach its target. As demand for commercial airplanes remains high and delivery flow has trended positively this year, with more upside next year, I do believe Airbus stock remains a buy.

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