EADSY - Airbus Delivery Goal Remains In Sight

2023-10-12 09:00:00 ET

Summary

• Airbus stock lost 8.3% in September, underperforming the broader market.
• Airbus booked 23 gross orders in September, including 10 A350s and 13 A321neos.
• Airbus delivered 55 jets in September, with a total value of $3.6 billion, showing improvement in supply chain issues.

I provide monthly overviews for orders, cancellations, deliveries, and other order book mutations for Airbus SE (EADSF), (EADSY). While the release of monthly orders and other order news does not always directly impact the Airbus stock price, it's important to keep track of the orders and deliveries because this provides the smallest blocks of information from which we can assess how things are going for the European jet maker and detect trends early on. In this report, I will be analyzing the Airbus orders for September 2023 as well as the deliveries.

How Is Airbus Stock Performing?

As I provide the reports on a monthly basis, it's also interesting to look at what Airbus stock has done over the month. After all, we're doing the analysis to align investors to make money. So, looking at stock prices is very relevant. During the month of September, EADSF stock lost 8.3% compared to a 5% loss for the broader market, and year-to-date we're looking at a 10.9% gain compared to 13.5% for the broader market.

What is somewhat interesting is that I generally view aerospace companies as market outperformers. However, year-to-date, Airbus stock is now underperforming the market. It is always difficult to pinpoint a reason because on many occasions stock price movement is a cumulation of several factors. The market dropping has not helped Airbus, but we also see some challenges that could more directly affect the European plane maker. One of those challenges is the issues with the Pratt & Whitney geared turbofan have put pressure on the stock, while the Airbus A321XLR might not quite live up to the range that Airbus promised. All of that does put some pressure on Airbus stock, while the company also seems to have removed an intermediate production target set for 2024, but those are factors that have been largely known. The news that could have driven Airbus stock, particularly in September, was the update on the GTF issues by RTX (RTX). Apart from that, the decline in share prices follows an announcement from Boeing announcing its market forecast for China, which could give rise to expectations that Boeing will soon resume deliveries of its most popular jets to China as the Boeing 737 MAX return to service has been 99% complete according to our findings.

Airbus Airplane Order News

In September, Airbus booked 23 gross orders, marking a sequential decrease of 94 orders. The orders consisted of 10 wide-body airplanes and 12 single-aisle jets with an estimated value of $2.3 billion:

• Turkish Airlines (TKHVY) ordered 10 Airbus A350-900s.
• LATAM Airlines Group (LTMAY) ordered 13 Airbus A321neo airplanes.

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

• BOC Aviation (BCVVF) took over delivery slots for three Airbus A320neo airplanes from JetSmart.
• Flynas took over a delivery slot for one Airbus A320neo from CMBC Financial Leasing.
• BOCOM Leasing was identified as the customer for one Airbus A320neo.
• ICBC Leasing was identified as the customer for one Airbus A320neo.
• Tibet Airlines Leasing was identified as the customer for one Airbus A319neo.
• CEBU Pacific converted orders for three Airbus A320neo airplanes to orders for three Airbus A321neo airplanes.
• IndiGo converted orders for six Airbus A320neo airplanes to orders for six Airbus A321neo airplanes.

Airbus logged 23 gross orders with a value of $2.3 billion, with no cancellations. During the month, we saw little action on the order front, but the order for 10 Airbus A350 is a big positive, and we also see LATAM Airlines placing new airplane orders while the future of the company had been in doubt some years ago. A year ago, Airbus booked 13 orders and three cancellations, bringing its net orders to 10 units with a net order value of -$728 million.

Year-to-date, Airbus has booked 1,241 net orders valued at $84.4 billion, compared to 647 net orders with a value of approximately $29.8 billion last year. So, we see net orders being up significantly driven by big wide body order cancellations last year, the effect of Qatar Airways cancellations last year and the order being reinstated this year as well as big orders from Indian airlines this year.

Airbus Airplane Deliveries Improve

In September, Airbus delivered 55 jets compared to 52 in the previous month. The European jet maker delivered 48 single-aisle jets and seven wide-body aircraft with a combined value of $3.6 billion:

• Airbus delivered four Airbus A220s.
• A total of 44 Airbus A320neo family aircraft were delivered, consisting of one Airbus A319neo, 23 Airbus A320neo aircraft and 20 Airbus A321neo aircraft.
• Airbus delivered two Airbus A330-900 airplanes to Condor.
• Five Airbus A350s were delivered, all of which were for the -900 variant.

Compared to last year, September delivery numbers remained stable, while the value of those deliveries increased from remained $3.6 billion. We're seeing the delivery numbers improve and that provides evidence that supply chain issues are easing, but it's too early to draw definite conclusions. For the year, the delivery numbers are now up 51 units to 488 compared to last year's 437 deliveries last year. The value of the deliveries has increased from $31.2 billion to $24.8 billion as the delivery volumes are increasing. The delivery profile remains backloaded, but Airbus should be able to achieve its 2023 delivery target.

The book-to-bill ratio for the month was 0.4 in terms of units and 0.6 in terms of value reflecting significant order inflow during the month, while the cancellation rate was 0% measured against the order inflow. The book-to-bill ratio for the year is looking extremely strong, at 2.6 in terms of units and 2.8 in terms of value. As I noted previously, we're looking for book-to-bill ratios higher than one, but even when that's achieved, these ratios also should be placed in context and one should keep in mind that cancellations are not accounted for in the book-to-bill ratios and current demand for airplanes is higher than the ability to deliver those airplanes which can also stock up the book-to-bill figures.

What Is Airbus' Delivery Target For 2023?

For 2023, Airbus expects around 720 deliveries, which was actually the same target it initially had last year. Likely with some easing in supply chain constraints, the company will be able to reach its target this year, but it does show that there is at least a one-year delay in the ramp-up planning. The delivery guidance fits my own expectations of around 725 airplane deliveries for 2023.

How Do Airbus Deliveries Compare To Boeing?

In September, Boeing (BA) delivered 27 airplanes, amounting to a total of 371 airplanes so far this year. Airbus delivered 55 jets bringing the total to 488. At the start of the year, Boeing deliveries were in line with that of Airbus but with a temporary halt on some single aisle deliveries the European jet maker is now in the lead.

Conclusion: Airbus Stock Remains A Buy

Airbus order numbers were far from impressive, but the orders that were received do carry significance and were up year-over-year. Throughout the year, we have been seeing airlines queuing to order planes in an effort to meet future demand. Overall, Airbus continues to hold a strong backlog for its commercial airplanes, and with demand for commercial airplanes being high, the pricing power on those sales is equally high giving Airbus the ability to sell slots forwards and attractive prices. The bigger challenge seems to be to increase the production in line with demand.

Noteworthy was that the typical end of quarter surge was absent in September, and the delivery numbers also did not show any year-over-year increase. So, the delivery numbers for September were not extremely strong and that increases the pressure for the remainder of the year, but I do believe Airbus SE stock remains a buy driven by long-term demand drivers and commercial airplane pricing strength and the delivery goal remains firmly in sight.

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