Tag Archives: aircraft deliveries

Turboprop market vs. oil price (ATR figures 2017 update)

Few days ago, the Toulouse-based aircraft manufacturer ATR (Avions de Transport Régional) published a press release [PDF, 139 kB] reporting some of its numbers for the year 2017 (being a private company, owned by Airbus and Leonardo, it does not publish a complete financial annual report). Some of the key figures were:

  • Revenues: 1.8bn$.
  • 80 deliveries (including 2 second hand aircraft).
  • Orders: 113 firm plus 40 options (112 of the orders for its ATR-72).

With this post I just wanted to log the latest data and update the graphic in which I compare ATR yearly deliveries profile with World GPD growth and most importantly oil price.

ATR figures 2017

ATR deliveries vs. GDP growth and oil price (2017 update).

It is interesting to note the drop of the oil price from around 90$ to below 50$ since 2015. ATR deliveries correlated well with oil price with a lag of a few years time. The correlation up to date continues to be quite high.

So far, through 2017 aircraft production has kept up around 80 deliveries a year. In 2017, the book-to-bill was 1.45 (with the above-mentioned 113 firm orders), so ATR should be able to cope with high production for another couple of years.

We will see later on whether the oil price raises again, whether the correlation deliveries/oil price holds or breaks, and whether ATR manages to keep up production in response to the market.

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My forecast of Boeing Commercial Airplanes 2017 revenues

Next January 31st, Boeing will hold an earnings conference where it will announce its Q4 and full 2017 year financial results, including the revenues of each of its units.

Three weeks ago, on January 9th, Boeing already issued a press release where it announced its deliveries and orders for 2017, mainly:

  • 763 commercial aircraft delivered (including 529 of the 737 family, or 136 787).
  • 912 net orders (after cancellations) (including 745 of the 737 family).

The release mentions “912 net orders, valued at $134.8 billion at list prices“, however those list prices are discounted, nothing new, and with an estimate of that discount I’ll try to guess the figure of revenues for the Boeing Commercial Airplanes division, not so much trying to be accurate in itself, but to point in advance to the increasing of the discounts as we will see below.

Where can we find Boeing list prices? Boeing host them in their site, these have just bee raised 10 days ago about 4% (see this comment about it). The previous prices dated from March 2017, when Boeing raised them again, that time by about 2% from its 2015 prices (untouched in 2016). To compute 2017 revenues and estimate of discount I use 2017 prices, not the latest ones.

If Boeing didn’t apply those discounts, the value of the 763 aircraft delivered in 2017 would yield revenues of above 118 bn$. To come to a ballpark figure, I will take the latest figure of discounts that I had calculated with 2016 and earlier figures, being the latest ~46%.

Discount evolution_2016

If I plug that discount into the 2017 list prices of the fleet mix of the 763 commercial aircraft that Boeing delivered we would come to a figure of revenues of 62.1 bn$. However, see below what was Boeing’s own guidance in their Q3 earnings release:

2017 Q3 Financial Outlook

Boeing’s 2017 Financial Outlook at Q3 2017 earnings press release.

At three months to the year end (Q3), they forecast between 760 and 765 deliveries, which turned in 763. At the same time they pointed to revenues between 55.5 – 56.5 bn$… and not above 62 bn$. I believe they will exceed their own estimate, but not by 5 bn$, that is why I see that their discounts have been greatly increased in the last 2017. They must have had a bad time in escalating prices of aircraft sold years ago, delivered in 2017 but with escalation conditions much lower than ongoing list prices.

With all these ingredients… my forecast is: 57.0 bn$.

Some comments to it:

  • My forecast is a bit more optimistic than their upper bracket (56.5) which may be slightly conservative.
  • The implied discount of my revenues forecast would be in the ~ 50% range.

(1) See here a couple of such forecasting revenues exercises that I did for Boeing’s 2014 and 2015 revenues.

(2) See here the latest detailed calculation of discounts that I posted in 2015.

 

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My forecast of Boeing Commercial Airplanes 2015 revenues

Last year, I put the model I use to estimate the discounts applied by Boeing on the sales of its commercial aircraft to the test of trying to forecast in advance what would be Boeing Commercial Airplanes division revenues for the year. In this post I want to repeat that exercise (1).

The latest estimate of the discounts that I made, in 2015 yielded a 47% (same as the previous year). See here the post in which that estimate was explained (using Boeing’s reported figures of deliveries, orders, list prices and revenues) and below its evolution.

 

Boeing Average Discount Evolution, through 2014.

Boeing Average Discount Evolution, through 2014.

As of today, January 11th, Boeing revenues for the full year 2015 have not been announced yet. Boeing’s investors relations website informs that the 2015 earnings conference call will take place on January 27th.

The process and sources with which I will reach to my forecast are described below:

  1. See here Boeing (net) orders for the year 2015: 768 aircraft among all models.
  2. See here Boeing deliveries in the year 2015: 762 aircraft among all models.
  3. See here Boeing 2015 list prices.
  4. See in the above curve the average discount I will use: 47% (this is the figure calculated with 2014 data, and that is a hypothesis that will be put to test with how accurate the forecast turns out).
  5. See here [PDF, 839KB] Q3 2015 earnings press release. I use it to see how were faring in 2015 Boeing Commercial Airplanes services, deducing it from the reported figures of Sales of Services, Boeing Capital and Global Services & Support, reported in different pages of the release. Up to end September 2015, the services figures were increasing in comparison to 2014 figures. I will assume the global figure to follow the same proportional increase; arriving at ~1,636 m$ for Boeing Commercial Airplanes services (remember, this figure will not be actually explicitly reported).

With all these ingredients… my forecast is: 66.98 bn$ (2).

In the 2015 Q3 report you can see Boeing’s own guidance for year-end figures:

Boeing’s 2015 Financial Outlook at Q3 2015 earnings press release.

Boeing’s 2015 Financial Outlook at Q3 2015 earnings press release.

Some comments:

First, you can see that my forecast (66.98 bn$) is about a billion dollars more optimistic than Boeing’s own outlook 3 months ago, 65.0-66.0 bn$  (3), which was even lifted from 64.5 – 65.5 in the 2015 Q3 earnings release.

Second, in the 2015 Q3 release, you can see the revenues up to end September (below). In them, you can see that up to then, revenues of Boeing Commercial Airplanes had increased 16% in relation to 2014. My forecast is a bit less optimistic here for the year-end as it estimates the increase in revenues will be +12% (that is due to lower deliveries in the Q4 of 2015).

Boeing Commercial Airplanes revenues Q3 2015.

Boeing Commercial Airplanes revenues Q3 2015.

Final comment: if Boeing managed in 2015 to command better prices on delivered aircraft, the figure will be even higher. If the figure is lower than the 66.0 bn$, and in line with Boeing’s Outlook, it’ll mean that the market is forcing Boeing to apply ever higher discounts to their published list prices.

I am now looking forward to January 27th and Boeing’s earnings call!

Note: After Boeing’s earnings call, in order to compare the results with the forecast and evaluate its accuracy I will either write an update of this post or a new entry.

(1) See here the post from last year, in which I missed the revenues by just a 0.3%, closer than analysts and Boeing’s own financial guidance provided in their 2014 Q3 earnings release.

(2) To be more precise the forecast from the model is 66,978 m$.

(3) As I mentioned in last year’s post, if my forecast turns out correct some may be tempted to say that this is the usual trick played by CFOs: to present better figures (in the results) than expected (in the outlook).

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Turboprop market vs. oil price (ATR figures 2014 update)

Few weeks ago, the Toulouse-based aircraft manufacturer ATR (Avions de Transport Régional) published a press release reporting some of its numbers for the year 2014 (being a private company, owned by Airbus and Alenia, it does not publish a complete financial annual report). Some of the key figures were:

  • Revenues increased 10% to 1.8bn$.
  • A new record of 83 deliveries (+12%).
  • A new record of sales with 160 firm aircraft orders (plus 120 options). (1)
  • A record backlog at year-end with 280 firm aircraft in the order book.

About 4 years ago, I wrote a post, “Turboprops market different dynamic“, in which I discussed:

[…] how civil turboprop market is unrelated to the larger and more known turbofan civil aircraft market and how its dynamics are completely unrelated to World GDP growth and thus world air traffic growth. […]

When calculating correlation between the different variables, I discovered that the correlation between GDP and deliveries is rather low, despite of the time lag applied (be it 2, 3, 4 years…). However I found that the oil prices and deliveries did correlate very well with a lag of 5-6 years, yielding coefficients of 0.55-.65, which are rather high.

I wanted to update the calculations I made then and last year, with the information of the 2014 exercise.

ATR deliveries vs. GDP growth and oil price (2014 update).

ATR deliveries vs. GDP growth and oil price (2014 update).

With the last years’ data, correlations are similar:

  • Between oil prices and deliveries: high, above 0.54 from 1 year time lag, increasing through 6 years time lag (when it reaches a maximum of 0.82).
  • Between GDP growth and deliveries: low, not more than 0.34, and negative correlations up from 1 to 5 years time lag.

If there was causality, we could infer that the from the moment that oil prices are computed, till they are taken into regional airlines’ models, the fleet planners identify the need for new turboprops, the case is approved by airlines’ management, discussions start with ATR, negotiations are closed between the airline and the manufacturer, the aircraft are built and delivered to the airline… it takes about 6 years. (2)

This year the prices of oil have abruptly decreased in the last quarter:

Oil prices drop Q4 2014.

Oil prices drop Q4 2014.

However, this large drop is not yet fully noticed in the comparison made before as the historical database I use (here) only reflects prices up to the end of November and thus the 2014 average is still 89$ vs. 92.4$ in 2013. Even so, taking into account the figures from December (~55$) the year average will drop only to about 86$, not changing much the result.

It would be interesting though to see if oil prices stay low (50-60$) for the full 2015 year. If so, we could check whether the correlation stands and ATR starts to notice it in the form of lower orders (more cancellations?) and this is translated into lower amount of deliveries in about 3 years time (2018?).

(1) Some 18 cancellations that took place in 2014 go untold in the press release, though they are easily deduced from the information of orders, and backlog from 2014 and 2013.

(2) About 3 of those 6 years are consumed from placing the firm order to getting the aircraft delivered, as we can see by the current figures of backlog (280 a/c) and yearly deliveries (83 a/c).

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Airbus backlog at end 2014 into perspective

Last Friday, Airbus Group announced its 2014 full year financial results at a press conference in Munich (Germany). You can find here [PDF, 785KB] the presentation used at the conference. In general, the results have been very positive in most metrics. There is one that in my opinion especially deserves attention, see it bellow:

AIRBUS 2014 results - backlog.

AIRBUS 2014 results – backlog.

Airbus has a record backlog of 6,386 civil aircraft.

In 2014, Airbus delivered 629 commercial aircraft. That is why, in the presentation it is stated “> 10 years of deliveries”. In essence, one may see it as if Airbus airplanes were sold out for the next 10 years! Of course, that is not the case for all product lines (think A330, A380) and will not be the case as a production ramp-up is announced in the A320ceo line.

Nevertheless, to put it into perspective, I wanted to compare this backlog to the historical aircraft deliveries of Airbus (which can be found here). Since its first delivery, an A300B2 back in May 1974, through the end of January 2015, Airbus had delivered 8,921 aircraft. With the information of yearly deliveries I compiled the graphic below, yearly per model and cumulative deliveries for all models combined.

AIRBUS deliveries through January 2015.

AIRBUS deliveries through January 2015.

Take a look at the cumulative deliveries.

On the occasion of the 8,000th delivery, on August 2013 (an A320 for AirAsia) Airbus published an article making a review of all the main delivery landmarks.

  • the 1st delivery, in May 1974, an A300B2.
  • the 1,000th delivery, in March 1993, an A340-300,
  • the 2,000th handover, in May 1999, an A340-300,
  • the 3,000th delivery, in July 2002, an A320,
  • the 4,000th delivery, in September 2005, an A330-300,
  • the 5,000th delivery, in December 2007, an A330-200,
  • the 6,000th delivery, in January 2010, an A380,
  • the 7,000th handover, in December 2011, an A321,
  • the 8,000th delivery, in August 2013, an A320 featuring Sharklets,
  • the 9,000th delivery… somewhere in the Spring 2015.

You can see that since the first delivery in 1974, it took Airbus almost 19 years to deliver the first 1,000 aircraft.

It took over 35 years to deliver the first 6,000 aircraft. That is what today it has as backlog…

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My forecast of Boeing Commercial Airplanes 2014 revenues

In the previous years I have been estimating the discounts Boeing applies to its list prices of commercial aircraft. You can see here the result of last year estimate (based on 2013 figures). The results I arrived at are that Boeing has been increasing its discounts in the recent years, and that in 2013 they topped ~47%.

Boeing Average Discount Evolution, 2013.

Boeing Average Discount Evolution, 2013.

With this post I wanted to take a step ahead and put the model to the test by using it for forecasting what will be Boeing Commercial Airplanes revenues for the year 2014.

As of today, January 15th, these have not been announced yet. In Boeing’s investor relations website you can see that the 2014 earnings conference call will take place on January 28th.

How will I reach to my forecast?

  1. See here Boeing (net) orders for the year 2014: 1,432 aircraft among all models.
  2. See here Boeing deliveries in the year 2014: 723 aircraft among all models.
  3. See here Boeing 2014 list prices.
  4. See in the above curve the average discount I will use: 47% (unchanged from past year, this is a hypothesis that will be put to test with how accurate the forecast turns out).
  5. See here [PDF, 841KB] Q3 2014 earnings press release. I use it to see how were faring in 2014 Boeing Commercial Airplanes services, deducing it from the reported Sales of Services, Boeing Capital and Global Services & Support. Up to end September 2014, the services figures were declining in comparison to 2013 figures. I will assume the global figure to follow the same proportional decline; arriving at ~589m$ for Boeing Commercial Airplanes services (remember, this figure will not be actually explicitly reported).

With all these ingredients… my forecast is: 60.2bn$ (1).

In the 2014 Q3 report you can see Boeing’s own guidance for year-end figures:

Boeing's 2014 Financial Outlook at Q3 2014 earnings press release.

Boeing’s 2014 Financial Outlook at Q3 2014 earnings press release.

Some comments:

First, you can see that my forecast (60.2bn$) is a bit more optimistic than Boeing’s own outlook 3 months ago, 57.5-59.5bn$ (2).

Second, in the 2014 Q3 release, you can see the revenues up to end September (below). In them, you can see that up to then, revenues of Boeing Commercial Airplanes had increased 13% in relation to 2013 (12.66% to be more precise). My forecast is a bit more optimistic here as well: at year end the increase in revenues will be +13.6%.

Boeing Commercial Airplanes revenues Q3 2014.

Boeing Commercial Airplanes revenues Q3 2014.

Final comment: if Boeing managed in 2014 to command better prices on delivered aircraft, the figure will be even higher. If the figure is lower than the 60.2, and in line with their forecast, it’ll mean that the market is forcing Boeing to apply ever higher discounts to their published list prices.

I am now looking forward to January 28th and Boeing’s earnings call!

++++++++

Update on February 11th:

As announced, Boeing published on January 28th its full 2014 results [PDF, 838KB]. Which were the Boeing Commercial Airplanes revenues?

Boeing Commercial Airplanes revenues full 2014.

Boeing Commercial Airplanes revenues full 2014.

That is 59.99bn$, or 206m$ short of my detailed forecast of 60.196bn$. This means that I missed with my forecast by a 0.3%, not bad. Even better taking into account that the main discrepancy have been the lower level of services under the commercial airplanes unit.

The result, as my intuition went was above the upper limit of the bracket Boeing gave as guidance for the full year in the 2014 Q3 report, 57.5-59.5bn$ (see note (2)).

(1) To be more precise the forecast from the model is 60,196m$.

(2) If my forecast turns out correct some may be tempted to say that this is the usual trick played by CFOs: to present better figures than expected.

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Turboprop market vs. oil price (ATR figures 2013 update)

Few weeks ago, the Toulouse-based aircraft manufacturer ATR (Avions de Transport Régional) published a press release reporting some of its numbers from 2013 exercise (being a private company, owned by Airbus and Alenia, it does not publish full financial annual report). Some of the key figures were:

  • Revenues increased 13% to 1.63bn$.
  • A new record of 74 deliveries (+16%).
  • Sales of a total of 195 aircraft (89 firm orders and 106 options). (1)
  • Backlog at year-end of 221 firm aircraft orders.

About 3 years ago, I wrote a post, “Turboprops market different dynamic“, in which I discussed:

[…] how civil turboprop market is unrelated to the larger and more known turbofan civil aircraft market and how its dynamics are completely unrelated to World GDP growth and thus world air traffic growth. […]

When calculating correlation between the different variables, I discovered that the correlation between GDP and deliveries is rather low, despite of the time lag applied (be it 2, 3, 4 years…). However I found that the oil prices and deliveries did correlate very well with a lag of 5-6 years, yielding coefficients of 0.55-.65, which are rather high.

I wanted to update the calculations I made then with the information of the last years.

ATR deliveries vs. GDP growth and oil price (2013 update).

ATR deliveries vs. GDP growth and oil price (2013 update).

With the last years’ data, correlations are similar:

  • Between oil prices and deliveries: high, above 0.54 from 1 year time lag, increasing through 6 years time lag (when it reaches a maximum of 0.77).
  • Between GDP growth and deliveries: low, not more than 0.26, and negative correlations up from 1 to 4 years time lag.

If there was causality, we could infer that the from the moment that oil prices are computed, till they are taken into regional airlines’ models, the fleet planners identify the need for new turboprops, the case is approved by airlines’ management, discussions start with ATR, negotiations are closed between the airline and the manufacturer, the aircraft are built and delivered to the airline… it takes about 6 years. (2)

(1) 15 cancellations (4 ATR-42 & 11 ATR-72) that took place in 2013 go untold in the press release, though they are easily deduced comparing orders and backlogs for 2013 and 2012.

(2) About 3 of those 6 years are consumed from placing the firm order to getting the aircraft delivered, as we can see by the current figures of backlog (221 a/c) and yearly deliveries (74 a/c).

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