2023-12-12 10:55:44 ET
Summary
- Dubai Airshow 2023 saw over 500 orders and commitments valued at nearly $41 billion, with Boeing and Airbus leading the announcements.
- Emirates placed a mega order for 95 Boeing airplanes, including 55 Boeing 777-9s and 35 Boeing 777-8s, with an estimated market value of $15.6 billion.
- The Boeing 787 program received additional orders from flydubai, Royal Air Maroc, Royal Jordanian, and Ethiopian Airlines.
The Dubai Airshow took place in November 2023. Airshows are the center stages of big airplane orders and for companies to announce new commercial airplanes and display new technologies such as urban air mobility solutions. In this report, I will not be providing an Airbus ( EADSF ) versus Boeing ( BA ) comparison. I ndeed, the airshows are used by the big OEMs to flex muscles but viewing order announcements through that lens somewhat diminishes the meaning of those orders. In this report, I will be analyzing the Boeing order announcements where I pay attention to the value of the orders, order types and any positive and meaningful accretion orders might have for commercial airplane orders.
More Than 500 Orders And Commitments At The Dubai Airshow 2023
Starting off with the broadest approach, where we look at all orders and commitments, we see that there were over 500 orders and commitments valued nearly $41 billion. I previously expressed my expectations that orders would be at a minimum of 350 units with a maximum of 750 valued around $60 billion. The 511 units announced seemingly fall roughly at the midpoint of the range but it should be pointed out that these numbers include 110 eVTOLs, which in terms of value are in a completely different regime than conventional airplanes.
If we filter out the eVTOL orders, we get to 401 orders and announcements valued around $40.2 billion. The major reason why Dubai Airshow orders did not quite reach the 750 units is because big orders from Turkish Airlines and Riyadh Air were delayed. Boeing and Airbus still brought in the bulk of the order announcements with 381 orders valued $39.8 billion. With a 77% share for Boeing and even 80% if we exclude customer reveals which do not add value as these are orders logged as unidentified in the order books and revealed during the show. Options also do not directly translate to the orders, so we are also filtering these out in our overviews. This brings the orders and commitments to 270 valued around $31.6 billion and that includes firm orders as well as tentative agreements. The former represents actual orders added to the backlog and the latter provides an indication of the sales pipeline. In the firm and tentative order tally, Boeing had a 79% share and 83.5% share expressed in dollar value.
Boeing Announces Mega Order From Emirates
The pinnacle of Boeing’s order announcements in Dubai came from Emirates as the carrier order 95 airplanes with an estimated market value of $15.6 billion. The order itself has a history dating back 10 years when Emirates became one of the launch customers for the Boeing 777X. Initially, Emirates ordered 115 Boeing 777-9s and 35 Boeing 777-8s for a total of 150 airplanes. In 2017, the company tentatively signed for 40 Boeing 787-10s but the order was never firmed.
In 2019, the initial order was altered as Emirates converted 30 Boeing 777X orders to orders for the Boeing 787-9 while converting six remaining orders for the Boeing 777-300ER to orders for Boeing 777X. In terms of units this change was neutral, but in terms of value this was a $4 billion reduction in order book value. In December 2019, additional changes to the books were made beyond the ones announced earlier and I had a call with Boeing regarding those changes and it turned out that Boeing and Emirates had agreed to convert firm orders for 11 Boeing 777X airplanes to orders to options leaving Emirates with 115 Boeing 777X orders and 30 Boeing 787-9.
Fast forward four years and Emirates converted orders for 30 Boeing 787-9s into 20 Boeing 787-8s and 15 Boeing 787-10. It is an interesting move since the Boeing 787-10 might be lacking range for some routes while the Boeing 787-8 is a relatively small airplane but with range to service thin long-haul routes. The order for smaller airplanes also provides some evidence that Emirates is changing its strategy from expanding capacity by utilizing bigger airplanes to optimize slots at Dubai International Airport to potentially size its fleet to grow from Al Maktoum Airport which should at some point in the future become Dubai’s superhub.
The order changes for the Boeing 787 added five orders with a net value addition of $142 million. The bigger change was for the Boeing 777X program where Emirates added 55 Boeing 777-9s and 35 Boeing 777-8s seemingly reinstating the order for the long-range variant of the Boeing 777X family.
With the changes, the Emirates orderbook now consists of 205 Boeing 777X airplanes and 35 Boeing 787s. The big question of course is when we can expect the orders to be converted to deliveries because the reality is that none of the Boeing 777X or Boeing 787 orders that Emirates agreed on over the past decades have resulted in deliveries.
More Orders For The Boeing 787 In Surprise Move From flydubai
While the order inflow from the Emirates order was rather small for the Boeing 787 program. The program could count on some meaningful order inflows as flydubai which was expected to place a narrow body order made a surprise move and ordered 30 Boeing 787-9s while Royal Air Maroc ordered two Boeing 787-9s and Royal Jordanian ordered four Boeing 787-9s. As part of a combined order for the Boeing 737 MAX and Boeing 787, Ethiopian Airlines signed for 11 Boeing 787-9s.
Boeing 737 MAX Momentum
The order inflow for the Boeing 737 MAX was not huge during the airshow but showed that momentum in the single aisle space persists with 45 Boeing 737 MAX ordered by SunExpress (including 17 Boeing 737 MAX 10 airplanes), tentative orders for 20 Boeing 737 MAX airplanes from Ethiopian Airlines and seven orders from SCAT Airlines.
Boeing Adds To Production Skyline: Significant Demand-Driven Upside To Production Rates
Looking at the additions to the backlog, it can be seen that the additions are more pronounced for the wide body programs. For the Boeing 777 program, Boeing added 21% in orders which would mean that the total share of the additions in the backlog would be 17% while this would even be a 25% increase for the Boeing 777X backlog. For the Boeing 787 backlog we see potentially see a 7% increase in orders leading to the new orders accounting for around 6% of the total backlog. For the Boeing 737 MAX program this increase was somewhat less at 2% reflecting an already strong backlog and orders from Riyadh Air and lessors remaining absent during the show.
For the Boeing 737 MAX, the order inflow would add 1.3 months in production against a targeted rate of 57 airplanes per month and nearly two months' worth of production at current transitionary rates. The addition for the Boeing 777 program is significantly higher. At a build rate of four airplanes per month, the 90 units order would add 22.5 months to the backlog and 18 months at a rate of five airplanes per month. For the Boeing 787, the order additions would add around five months' worth of assembly work for the Boeing factory. So, we see the order announcements made in a matter of days adding months and in the case of the Boeing 777 program even adding years in production work. These orders in my view provide additional basis for Boeing to compile a production schedule in the future to run the assembly lines at higher rates and possibly beyond the production rates that are currently planned by mid-decade.
Conclusion: Boeing Is Paving A Path For Higher Production Rates
Without a doubt, Boeing has felt like the winner of the Dubai Airshow. From a production perspective, 2023 has definitely not been the year that the jet maker or its shareholders were looking for but over the past months we have also seen many positives that add value to the business in the longer term and the strength in order inflow as seen during the Dubai Airshow is an example of demand strength that is likely to aid the company in increasing production, increasing cash flow and deleveraging in the years ahead. As a result, I am maintaining my buy rating as I believe we are in the very early stages of Boeing’s significant increase in free cash flow and deleveraging.
For further details see:
Boeing: $26 Billion Surprise Win