Airbus: 'Plane' Simple!

When it comes to flying through the skies, it’s ‘plane ‘ simple these days. It’s the European aircraft manufacturer Airbus that is the top of the roost right now as it overtakes arch-rival Boeing yet again in a constant toing and froing of power struggling for the top position.

If anything is to be believed, then Fabrice Brégier, President and Chief Executive Officer of Airbus told CNBC in an interview that Airbus “runs the show”. Don’t you just love the power-play, the pestering belief that the EU economy (just like the US one) is going to pull back to strength beyond belief? I can’t see anything that is showing that the EU is pulling out of its worry, hardship and woes.

Although admittedly, it’s no longer either the Europeans or the Americans that buy aircraft these days, is it? They haven’t got the spare cash that runs to pumping up the engines of the latest design. It’s only Dubai dreamers that can still make that one come true.  It’s just so ‘plane’ simply, no-frills: the EU has just overtaken the USA where aircraft manufacture is concerned and that will deal a hefty blow to the US manufacturer.

  • Airbus today posted a staggering record of 1, 619 new aircraft orders in 2013.
  • There is a production backlog of 9 years (5, 559 aircraft, which is 500 aircraft more than Boeing).
  • This is the 12th consecutive year that Airbus has managed to increase its deliveries.
  • Net orders increased by 80% year on year at the end of December 2013.
  • Boeing finished its year with orders to the tune of 1, 355 net orders.
  • The 80% in orders means that it was 2.5 times more than Airbus was able to deliver.
  • Such levels would be impossible to sustain and Airbus openly admits that. But, they are assured of the next few years at least.

Briéger stated: “What I expect in 2014 is that the book-to-bill ratio will still be above one, and so we will continue to increase our backlog. This is fantastic”.

He went on to add that the USA and the EU were still important markets but, it was simply renewing old fleets primarily from these two areas that were bringing in orders. The mainstay of the orders for Airbus were emanating from Asia and the Middle East.

Market

Almost 40% of backlog orders are already from Asia for the European manufacturer. This is due to the increase in wealth in this region and the huge size of the population. Travel is becoming a democratized part of what are essentially non-democratic regimes. People are increasingly partaking in that increased wealth.

Only 15% of the world population has ever flown on a plane. But, if we are to believe Briéger, then the sky’s the limit. But, it’s just that where the problem is to be found. The sky may not be big enough. Increased demand may well mean shifting production facilities to that region.

Airbus and Boeing

Airbus v's Boeing

Airbus v's Boeing

Airbus suggested in the Global Market Forecast (September 2013) that there would be a need for a passenger and freighter aircraft increase of 29, 220 between 2013 and 2032. They also suggest that there will be a need for a doubling (from 17, 739 in 2013 to 36, 500 passenger aircraft in 2032).

Boeing looks as if it is in for a rough ride now. That’s after all of 2013’s problems with the Dreamliner planes and the ice-crystals forming on the engines. The 787 has suffered nothing but setbacks since it was introduced in 2011. There have been fires (Ethiopian Airlines at London’s Heathrow Airport) and Japan Airlines had to pull planes from flight schedules due to battery and electric faults on their planes. It might have been one of the most impressive planes to hit the skies, but perhaps the shoddy work and design might mean that the buyers have gone elsewhere.

So is Airbus running the show as Brégier states? It might just be. Although, we all know that Airbus might be up there on cloud 9, blissfully happy; but happiness is a relative thing and the glory of the peaking of the existence of the European manufacturer, just like everything else, will (eventually) fade. Let’s see if they get to seventh heaven too.

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tothetick

Professional team of writers/analysts analyzing the financial markets.

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