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Boeing (NYSE: BA) released its annual forecast for the commercial jet market in October. Unsurprisingly, the aerospace giant has lowered its estimate of global aircraft deliveries over the next 20 years – and especially for the current decade – from its outlook for 2019.
Despite reducing its long-term forecast, Boeing may still be overstating the level of demand for aircraft between 2020 and 2029. However, the scariest thing about its updated outlook is that even though its demand forecast is correct , Boeing has virtually no way of turning back the clock. to pre-pandemic production levels during the current decade.
What the forecasts say
Boeing estimates that manufacturers will deliver 18,350 new aircraft between 2020 and 2029, including 1,240 regional jets: a market segment that Boeing and Airbus (OTC: EADSY) do not participate. This places the estimated addressable market for Boeing and its main rival at 17,110 aircraft over the 10-year forecast period.
Unsurprisingly, Boeing expects single-aisle mainline jets (like the Boeing 737 MAX) to continue to account for the vast majority of demand, with 13,570 deliveries between 2020 and 2029. Widebody passengers and freighters make up the remaining 3,540 deliveries.
Most of these deliveries are intended for
What scares Boeing is that most of those planned deliveries have already been sold – and especially not by Boeing. This is especially true for narrow crates: the high volume segment of the market.
In the first 10 months of 2020, Airbus delivered 355 single-aisle jets. It ended October with a huge order book of 6,517 unsatisfied narrow-body orders in its A220 and A320 families. Airbus 2020 deliveries and current firm orders represent 51% of what Boeing projects will deliver throughout the decade in the single-aisle market. Meanwhile, due to the grounding of the 737 MAX, Boeing has so far delivered only 13 narrow bodies (mostly military variants). Its order book for the 737 family – its only entry into the single-aisle market – totals 3,365 orders.
Moreover, while Boeing and Airbus dominate the commercial jet market, they are not the only players. Russian Irkut had received 175 firm orders for its MC-21 jet in September. Meanwhile, China’s COMAC says it has 815 orders for its C919 aircraft, although only around 300 of these appear to be firm orders. The two new models made their first flights in May 2017, and both manufacturers plan to start deliveries at the end of 2021, although there is certainly a possibility that the schedule will slide to 2022.
In short, more than 10,700 single-aisle jets were delivered in 2020 or are on firm order today. The 737 MAX is less than a third of that figure. Meanwhile, less than 3,000 additional single-aisle jets are expected to be ordered to meet projected market demand through 2029. Unless Boeing gets the lion’s share of those orders – which would mark a big turnaround from recent history – it’s practically locked in its current position of # 2 distant in the most important part of the commercial jet market.
To be fair, Boeing is in better shape for the jumbo jets, where it still has a dominant market share. It delivered 98 jumbo jets this year – including passenger, cargo and military variants – compared to just 58 deliveries for Airbus. Boeing ended October with 910 firm widebody orders pending, compared with 860 from Airbus. However, jumbo jets (including freighters) will only account for 20% of aircraft deliveries this decade, according to Boeing forecasts. In addition, this projection could still be too generous.
A new standard for Boeing
In 2018, Boeing delivered 806 commercial jets: 580,737 and 226 jumbo jets. During this time, Airbus delivered 800 jets: 646 narrow bodies and 154 large jets.
Airbus’ current backlog for narrow fuses equates to an average of over 700 annual deliveries between 2021 and 2029: more than what it delivered in 2018. Boeing’s current backlog would not even support a average of 400 annual deliveries of 737. With potentially less than 3,000 additional orders to be won for narrowbody deliveries this decade, the aircraft manufacturer would need to capture a disproportionate share of that business to resume building nearly 600,737 per year. year.
Getting even 50% of the incremental order volume could be difficult. The Airbus A220 is smaller than the smaller 737 MAX, allowing it to reduce travel costs, while the A321XLR has a much greater range than any 737 MAX. Thus, Airbus is targeting market segments in which Boeing does not participate today. Moreover, Irkut and COMAC are virtually guaranteed to capture additional orders due to their status as national champions. COMAC in particular is poised to tap into China’s huge airline market.
For wide-body aircraft, even if Boeing’s forecast is correct and retains a modest market share advantage, annual deliveries would remain significantly below its 2018 total. Barring an unexpected event that provokes a rapid change in the market share landscape, Boeing will struggle to fully recover from the double whammy of the 737 MAX grounding and the COVID-19 pandemic.
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