Tag Archives: deliveries

A380 vs. 747: orders and production rates

After the recent announcement by Airbus and Emirates of the signature of an MoU for up to 36 A380 (press release), my friend and colleague Jose and I quickly wondered how would that leave a series of comparisons in which we set out years ago to compare how quickly or not sales of the 747 piled up back in its heyday.

See below the update of those couple of graphics.

First see in the graphic below A380 orders since the programme launch (2001) in comparison to those of the 747 (1966):

A380 vs 747 - Launch 2017

A380 and 747 orders referenced to the year of launch of each programme (up to 2017).

Both programmes show an initial sales rush at the time of programme launch. In both cases the rhythm of sales slowed down after the second year. In the first 18 years of program, each had managed:

  • 747: 615 orders.
  • A380: 337 orders (55% of 747’s). With a caveat being that we are now in January 2018 and through the end of the year the A380 could pile up some more orders.

Thus, we can see that the Boeing 747 was selling better already from the beginning of the programme.

I include again yet another comparison: aircraft orders taking as reference the year of first delivery, having heard so often the industry mantra that some potential customers would wait to see the aircraft in operation before placing orders. See below this second comparison:

A380 vs 747 - Delivery 2017

A380 and 747 orders referenced to the year the 1st aircraft delivery of each programme (up to 2017).

In this case, and due to the shorter time to develop the Boeing 747 since program launch (1966), the difference in sales is slightly narrowed:

  • 747: 554 orders.
  • A380: 337 orders.

You can see that, 11 years after the 1st delivery of each aircraft (2007 for the A380 and 1969 for the 747) the 747 had sold about 50% more aircraft and that is due to the pick up of sales it went through from its 8th year of operation.

Finally, I include below an update of yet another graphic in which we compared the Boeing 747 and Airbus A380 production rates throughout history. The bars show Boeing 747 yearly deliveries. The lines the monthly production rate for both aircraft and its 3-year rolling average. I took this average to smooth the curve even if it is very similar to the year-by-year data.

A380 vs 747 - rate 2017

Some comments on the 747 production rates (taken from its yearly deliveries):

  • The average monthly production rate since its first delivery back in 1969 has been: 2.6 airplanes per month (1.7 for A380).
  • During the first about 30-35 years (till ~2002-3) the rate fluctuated between 2 and 5 deliveries per month.
  • Since 2003 the rate has averaged 1.2.
  • For the first 11 years of the 747 programme (as the A380 just completed those first eleven years of deliveries), its production rate averaged 3.1 aircraft per month.

Time will tell if the market for the A380 picks up.

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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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A380: 747 production rate throughout history

Back in 2013, I wrote a post comparing the orders of the Airbus A380 compared to those of the Boeing 747 Jumbo taking different references for the comparison. As I explained then, the idea for the post was triggered by a conversation with my friend Jose. A year later, in 2014 I wrote an update of that comparison (here).

This post is yet again triggered by another point raised by Jose (1) in another conversation a few months ago, when Airbus announced that it has reached the unit break even point for the A380 programme in 2015 with 27 deliveries. In that news it was already mentioned that the company sought to lower the number of aircraft for breaking even on any given year. The point became more relevant since Airbus confirmed, this week at Farnborough air show, that it would slow down its production pace to a monthly rate of 1 aircraft per month from 2018.

In our conversation, Jose looked at how the Boeing 747 production rate had evolved throughout history. Taking the figures from the 747 article in the Wikipedia (here), you can see the results in the graphic below. The bars show yearly deliveries. The lines the monthly production rate and its 3-year rolling average. I took this average to smooth the curve even if it is very similar to the year-by-year data (1).

747 rate

Some comments on the 747 production rates (taken from its yearly deliveries):

  • The average monthly production rate since its first delivery back in 1969 has been: 2.7 airplanes per month (above 2.25 for A380 in 2015).
  • During the first about 30-35 years (till ~2002-3) the rate fluctuated between 2 and 5 deliveries per month.
  • Since 2003 the rate has averaged 1.3.
  • For the first 10 years of the 747 programme (as the A380 is just about to complete that first decade of deliveries), its production rate averaged 2.9 aircraft per month.
  • Even if not reflected in the graphic, for information, Boeing has announced that it would decrease production rate down to 0.5 airplanes per month (6 a year) from September 2016.

Time will tell if the rate for the A380 is sustainable and whether its market rebounds.

(1) I took 3 years to make the rolling average as the fact of confirming in 2016 a delivery rate decrease to be effective from 2018 may give an idea of lead times.

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Boeing 787 orders, cancellations, deliveries & backlog through 2015

Quick post with the updated figures and graphic of orders, cancellations, deliveries and backlog of the 787 programme at the end of 2015.

There were no major operational hick-ups in 2015, but commercially it saw 28 cancellations for 99 gross orders, thus, 71 net orders. This, together with the increased ramp up which enabled 135 deliveries, make that the book to bill of the programme stood at 0.53, far from a desired >1. Therefore, the backlog at year-end continued to decrease down to 779 aircraft (1).

An image is worth a thousands words:

 

787 orders, cancellations, deliveries and backlog through 2015.

787 orders, cancellations, deliveries and backlog through 2015.

(1) That level is lower than 2007 year-end backlog. The highest at previous year-ends was 916 in 2013.

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Twin-aisle aircraft deliveries 20-year forecast (update 2015)

In a previous post I shared a graphic with the “Commercial wide-body airplanes’ deliveries per year, 1969-2015” (see below). I then commented:

“Looking backwards it’s clear that 2015 was a peak in wide-bodies deliveries. Looking forward it may have been a short-term peak, but looking further ahead it is not so clear.”

Commercial wide-body airplanes' deliveries per year, 1969-2015.

Commercial wide-body airplanes’ deliveries per year, 1969-2015.

Last November, I published a post, “Airbus vs. Boeing, comparison of market forecasts (2015)“, with the following table that compares Airbus’ Global Market Forecast and Boeing’s Current Market Outlook:

Comparison of Airbus GMF and Boeing CMO 2015-2034.

Comparison of Airbus GMF and Boeing CMO 2015-2034.

If we focus on the twin-aisle segment, we see that both companies are very closely forecasting between 7,500 and 7,600 passenger aircraft deliveries (with less than 90 aircraft of difference, a 1.2% deviation). The forecast for the freighters is not shown in the table but it is also very similar for the segment, between 718 (Airbus’ view) and 800 (Boeing’s) freighter aircraft. In combination, each company foresees between  8,290 (Boeing view) and 8,297 (Airbus’) airplanes’ deliveries in the segment. Remarkably similar and definitely converged from years ago.

In the very large aircraft segment both forecasts do not converge. But since the figures of deliveries are an order of magnitude lower, I will focus on what they define as “twin-aisle” segment.

Let’s put forward again the question: was 2015 a peak year in terms of twin-aisle deliveries?

Quick math: if we take those ~8,300 aircraft to be delivered in the next 20 years, we arrive at an average of 415 aircraft per year. That figure excludes the very large aircraft. In 2015, there were 367 deliveries of twin-aisles (excluding A380 and 747):

  • A330: 103
  • A350XWB: 14
  • 767: 16
  • 777: 98
  • 787: 135
  • IL-96: 1

Thus, in 2015 we would have been far from the peak. If we simply linearized those 8,300 deliveries from 2015 levels up to 2034, we would get the following profile:

Twin-aisle deliveries historic and 20-year forecast.

Twin-aisle deliveries historic and 20-year forecast.

The reader may correctly think that market forecast figures are not engraved in stone and are rather optimistic. Fair enough.

Both forecast have been rather accurate in the past forecasting traffic growth. Not necessarily in forecasting the number of aircraft in each specific segment. See the post, “Aircraft market forecasts accuracy (update 2014)“,  in which I analyzed Boeing CMO forecast of 1999 with the actual fleet at the end of 2013. See the result below:

Comparison of aircraft fleet at year-end 2013: 1999 forecast vs. actual (sources: Boeing CMO 1999 and 2014).

Comparison of aircraft fleet at year-end 2013: 1999 forecast vs. actual (sources: Boeing CMO 1999 and 2014).

Thus, in 2013 there were 27% less twin-aisle aircraft than what had been predicted in 1999.

If 2015 market forecasts were off the mark in the same proportion (27%), that would mean that instead of 8,300 airplane deliveries in the next 20 years we would see about 6,050… meaning ~300 airplanes per year in the 20-year span.

In that case, we might have seen the peak.

Let’s take a look at current backlogs at the end of 2015:

  • Airbus: 1,112 a/c
    • A330 family: 350 a/c
    • A350: 762 a/c
  • Boeing: 1,383 a/c
    • 767: 80 a/c
    • 777 family: 524 a/c
    • 787: 779 a/c

Thus, at the end of 2015 the combined backlog (firm) stood at ~2,500 airplanes. That is a 30% of the 8,300 forecast, and a 41% of the 6,050 aircraft (i.e. forecast reduced in 27%).

The sceptic reader could still have doubts of the quality of the backlog (i.e., some customers may go through troubled waters and cancel orders).

Last year, I published a post, “Boeing 787 orders, cancellations, deliveries & backlog through 2014“, in which I showed the orders and cancellations of the 787 programme since its launch. See the summary graphic below:

787 orders, cancellations, deliveries and backlog through 2014.

787 orders, cancellations, deliveries and backlog through 2014.

The 787 programme experienced serious delays and industrial issues from 2009 to 2013 in the midst of the worst financial and economic crisis since the Great Depression of the 1930s. Through 2014, the programme had suffered 247 cancellations out of 1,318 gross orders, that is almost 19% of cancellations.

I believe that 19% can be considered an upper ceiling of how much of the current 2015 twin-aisle backlog (~2,500 a/c) could be considered as dubious. Thus, at least about 2,000 firm orders could be seen as rather secured.

Let’s see at the question (was 2015 a peak year?) from a different perspective: in the immediate coming years, what are the announced production rates?

Thus, according to the announced production rates and targets, in 2016 we should see about 380 twin-aisle combined deliveries, higher than the 367 we saw in 2015.

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Commercial wide-body airplanes’ deliveries per year, 1969-2015

The first wide body commercial airplane, the first twin-aisle ever, the Boeing 747 first flew in February 9th 1969 and it was first delivered to a customer (Pan Am) in December 1969. In the following years new wide bodies arrived to the market: the Douglas DC-10 (in 1971), the Lockheed TriStar (1972), the Airbus A300 (1974)…

In the last weeks, both Airbus and Boeing have released the figures of aircraft deliveries for the complete 2015. With them I updated a graphic I had made back in 2013 with the commercial wide-body airplanes’ deliveries per year. Take a look at it.

Commercial wide-body airplanes' deliveries per year, 1969-2015.

Commercial wide-body airplanes’ deliveries per year, 1969-2015.

Some reflections:

For the first time ever, over 400 twin-aisle aircraft were delivered in a year. The feat is remarkable.

The average number of deliveries for the previous 20-year period (1995-2014) was 215 airplanes per year. Up to now, in the previous 46 years of twin-aisle market, in only 3 years more than 300 airplanes were delivered in a single year (the previous 3: 2012, 2013 and 2014) and only 12 times more than 200 airplanes had been delivered (including the previous 3 with more than 300).

The combined steep production ramp-up during last 4 years has enabled to reach a production rate of almost the double of what was produced just 5 years ago. In particular, the combined compound annual growth rate (CAGR) of the rate of deliveries for the last 5 years has been 16.1%, for the last 10 years 10.4%. These rates are the triple and double than the yearly growth of traffic (measured in RPKs).

With the figures up to the end of 2015, almost 8,000 wide-body airplanes had been delivered. Thus, by now, end of January 2016, we have certainly reached the figure (1). We however don’t know whether the 8,000th twin aisle was a Boeing or an Airbus (2).

The share of deliveries in 2015: 65% Boeing and 35% Airbus. Boeing has slightly increased its share of deliveries in the last 4-5 years, in particular with the ramp-up of the 787.

There were 135 787s delivered in 2015. That is another remarkable feat: the largest amount of twin-aisle deliveries of a single model in a single year ever.

Only 6 times ever (combination of model-year) have there been twin-aisle deliveries of over a hundred airplanes: the A330 in the last 4 years (with a peak of 108 airplanes in 2013 -then a record- and 2014) and the 787 the last two years. Only other 10 times there were deliveries of more than 80 airplanes of a single model in a year: the A330 (2010-2011), the 747 in 1970 and the 777 (7 times, including the last 4 years consecutively, out of which the last 3 on the verge of 100 deliveries – 98, 99, 98).

Two days ago Boeing released its 2015 earnings, and with it news of 777 production cut came up. Some time before similar news had come of 747 production rate decrease. With these news, quickly came comments of whether aerospace cycle may have peaked (see here). Looking backwards it’s clear that 2015 was a peak in wide-bodies deliveries. Looking forward it may have been a short-term peak, but looking further ahead it is not so clear. I will leave for another post the outlook of past deliveries mixed with what Airbus and Boeing market forecasts say (GMF and CMO, respectively).

(1) With the sources I used,  at the end of 2015 there were a combined 7,988 wide-bodies delivered. However, I found different figures for the deliveries of the Ilyushin IL-86 (between 95 and 106). In any case, both figures would leave the total tally below 8,000 (making 2016 “the year of the 8,000th delivery”); I took for the analysis most conservative figure.

(2) Working at the moment for the Airbus A330neo programme, I will assume the 8,000th delivery was an A330, rather than a Boeing.

(3) I have indicated in the post that we have just passed the mark of 8,000 wide-bodies delivered since 1969, and, on the other hand, the different studies state that there are about 4,900 twin-aisle in operation. The gap of ~3,100 airplanes corresponds to those retired, parked, scrapped, crashed, displayed in museums…

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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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