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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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Wide-body mix in 17 years of Boeing CMOs

Two years ago, I wrote a post showing the puzzling change in Boeing’s predicted mix of twin-aisle sales, between small and medium wide-bodies (“Wide-body mix in 15 years of Boeing CMOs”) (1). A few days ago I wrote a post about the publishing by Boeing of its Current Market Outlook for 2015-2034.  As I noted in that post, this year’s CMO is consistent with last year’s figures, i.e., the larger share of the forecasted market corresponds to small wide-bodies (787s from Boeing’s perspective). Recall the numbers:

  • small wide-bodies: 4,500 a/c in CMO2015 (passenger aircraft only),
  • medium wide-bodies: 2,990 a/c in CMO2015 (same figure as in CMO2014).

In the sub-segment of the medium wide-bodies passenger aircraft figures for  have remained constant and there is a slight increase in freighters (60 a/c); whereas for small wide-bodies the main increase is seen in the passenger aircraft (+230 a/c).

Since I keep a collection of CMOs from many years, I will include again a comparison going 17 years back…

Twin-aisle mix distribution (Boeing CMO 1998-2015, includes both passenger and freighter aircraft).

Twin-aisle mix distribution (Boeing CMO 1998-2015, includes both passenger and freighter aircraft).

Seeing at the graphic, made using Boeing’s forecasts’ figures:

  • During the first 5 years (1998-2003) the trends are quite constant, seeing medium wide-bodies a slightly higher demand.
  • From 2003 to 2007, the mix is reverted, possibly to favour the launch of the 787.
  • In 2008 the CMO did not provide the split.
  • From 2009 to 2013, you can see that both trends in the forecasts are erratic… why? Only Boeing knows. (2)
  • From 2013 to 2015, it seems that the trends are stabilized again in a higher demand for 787-size aircraft.

(1) Last year, I made an update of that post with the consolidated view of the last 16 years, find it here.

(2) A speculation: a Boeing-internal need to sell the concept of the 777X?

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Review of Boeing Current Market Outlook 2015

Just ahead of Paris air show, Boeing Commercial published its yearly update of the Current Market Outlook (CMO) for the next 20 years of commercial aircraft market (2015-2034).

I have just compared the figures for passenger aircraft of the last two years’ CMOs:

CMO 2015 vs 2014 comparison.

CMO 2015 vs 2014 comparison.

Some comments to it:

  • You can see that the total number of new aircraft delivered has slightly increased from 35,930 to 37,130, a 3.3%, which is consistent with the 4.9% traffic increase (1) that Boeing predicts (2).
  • The volume (Bn$) increases by a larger percentage, 6% (320Bn$)… this is due mainly to the increase in:
    • single-aisle aircraft expected sales in volume (8%, +210Bn$) and aircraft (+210), and
    • small wide-body segment with 230 more aircraft (+5%) and an increase in volume of 100Bn$ (+9%).
  • Two years ago, I wrote about a sudden change between CMO 2013 and CMO 2012 of the mix in wide-bodies; in this respect, CMO 2015 is consistent with last year’s one, showing simply a slight increase in demand for both sub-segments.
  • Interesting to note how Boeing continues to downplay the large aircraft segment (-16% in terms of number of aircraft) at the moment when a A380neo is discussed.

This year study’s figures and presentation focus on single-aisle (737 MAX, “fuelling forecast”) and small wide-bodies (787, “re-shaping long-haul marketplace”), the products to be pushed by the sales force.

Find below the nice infographic [PDF, 2.1MB] that the guys from Boeing have put up together:

Boeing Commercial Aviation Market Forecast 2015-2034 infographic.

Boeing Commercial Aviation Market Forecast 2015-2034 infographic.

As always, I recommend going through the CMO, as you can learn a lot about the business: from global numbers, to growth, traffic figures, fleet distributions, forecasts, etc… You may find the presentation [PDF, 3.8 MB], a file [XLS, 0.6 MB] with all the data or the full CMO report [PDF, 6.5MB].

For a comparison between this CMO and the respective Airbus’ GMF we will have to wait until after the summer, when Airbus publishes its update. Until then, find here the comparison based on 2014 market studies.

This year together with the CMO, Boeing provides two interesting papers from a couple of years ago: Key Findings on Airplane Economic Life [PDF, 0.3MB, dating from August 2013] and A Discussion of the Capacity Supply -Demand Balance within the Global Commercial Air Transport Industry [PDF, 0.6MB, dating from August 2013].

(1) Traffic increased measured in RPKS (revenue passenger kilometers) in billions.

(2) These two ratios, 3.3% fleet demand and 4.9% traffic growth, point to an implicit increase in the average size of the aircraft in fleet and / or a higher utilization of the aircraft (higher availability).

(3) Find the reviews I wrote comparing 2014 CMO with 2013 CMO and 2013 CMO with 2012 CMO.

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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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Airbus vs. Boeing, comparison of market forecasts (2014)

Yesterday, Airbus released the new figures of the 2014-33 Airbus’ Global Market Forecast (GMF, PDF 7.5MB).

In previous years, I have published comparisons of both Airbus’ and Boeing’s forecasts (Current Market Outlook, CMO, PDF 5.3MB). You can find below the update of such comparison with the latest released figures from both companies.

Comparison of Airbus GMF and Boeing CMO 2014-2033.

Comparison of Airbus GMF and Boeing CMO 2014-2033.

Some comments about the comparison:

  • Boeing sees demand for 9% more passenger aircraft (excluding regional a/c) with a 10% more value (excluding freighters). The gap is closing, as in previous years Boeing forecasted up to 14% more aircraft.
  • In relation to last year studies, Airbus has increased demand by ~2,000 aircraft whereas Boeing by ~1,000.
  • Boeing continues to play down A380 niche potential (59% less a/c than Airbus’ GMF). This year, both companies have reduced in about 100 units their forecasted demand for the VLA segment.
  • Both companies’ forecast for the twin aisle segment is nearly identical: 7,260 aircraft. The mix between small and intermediate twins varies, 700 units up and down. However, Boeing’s wide-bodies mix is not to be taken as engraved in stone, see the erratic trend in the last years here.
  • On the other hand, Boeing forecasts about 3,600 single-aisle more than Airbus (the gap has closed in 800 units this year). The largest part of the difference comes in the single-aisles over 175 seats (A321, 737-9).
  • In terms of RPKs (“revenue passenger kilometer”), that is, the number of paying passenger by the distance they are transported, they see a similar future: Airbus forecasts for 2033 ~14.5 RPKs (in trillion) while Boeing forecasts 15.5 RPKs.

The main changes from last year’s forecasts are:

  • Both manufacturers have increased their passenger aircraft forecast, ~2,000 a/c Airbus and 1,000 a/c Boeing,.
  • Both manufacturers have increased the value of RPKs in 2033  (about 5-7%).
  • Both manufacturers have increased the volume (trn$) of the market in these 20 years, about 6.7% Airbus (to 4.4trn$) and 5.7% Boeing (to 4.86trn$) (excluding regionals and freighters).

Some lines to retain from this type of forecasts:

  • Passenger world traffic (RPK) will continue to grow about 4.7% per year (5.0% according to Boeing). This is, doubling every ~15 years.
  • Today there are about 16,855 passenger aircraft around the world (according to Airbus), this number will nearly double in the next 20 years to above 30,555 a/c in 2033 (over 33,000 as seen by Boeing).
  • Most deliveries to go to Asia Pacific, 39% or over 12,200 passenger aircraft
  • Domestic travel in China will be the largest traffic flow in 2033 with over 1,500bn RPK, or 11% of the World’s traffic.
  • Over 12,000 aircraft will be retired to be replaced by more eco-efficient type.
Trips per capita vs. GDP per capita (source: Airbus GMF).

Trips per capita vs. GDP per capita (source: Airbus GMF).

As I do every year, I strongly recommend both documents (GMF and CMO) which provide a wealth of information of market dynamics.

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Aircraft market forecasts accuracy (update 2014)

About two years ago I wrote a post in which I analyzed the accuracy of commercial aircraft market forecasts. In particular, Boeing’s series of yearly Current Market Outlook (CMO). In that comparison, between the CMOs from 1997 and 2012, we could compare the predicted and the actual world fleets at 2011 year-end. Except for the twin-aisle segment and especially the large aircraft sector, the accuracy was remarkable, as the estimated global fleet only exceeded the actuals in 1%.

In this post, I just wanted to provide an update with the figures from the latest CMO (2014), released a few weeks ago, in comparison with 1999’s CMO. In that CMO from 1999 [PDF, 1.5MB], we find the following chart showing Boeing’s forecasted fleet size and distribution for 2003, 2008, 2013 and 2018 year-ends.

1999 Boeing CMO year-end fleet forecasts for 2003, 2008, 2013 & 2018.

1999 Boeing CMO year-end fleet forecasts for 2003, 2008, 2013 & 2018.

In 2014 CMO, Boeing offered figures of 2013 year-end fleet (1).

Fleet at year end 2013 - Boeing 2014 CMO.

Fleet at year-end 2013 – Boeing 2014 CMO.

And now, the comparison is immediate:

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).

Some reflections:

  • The forecasts for all segment except for single-aisle (737-800) predicted higher numbers of aircraft in the fleet than the actuals have shown 15 years later (2).
  • The total fleet figure was missed by 11%, a larger deviation than the 1% from two years ago.
  • The 737 has been the model outselling the forecasts, offsetting partially the lower demand in all other segments. In particular, even if deviations per segment have been higher, the global forecasted figure for passenger aircraft has been missed by only 3%.
  • The forecast is especially off mark the twin-aisle, where there are over 1,700 less aircraft in the current fleet than forecasted (3).

For the next such comparison we will need to wait some years, as from the year 2000 Boeing provided CMOs in a different fashion, offering a view of the forecasted fleet only 20 years from the date in question, instead of a view every 5 years. Therefore, we will have to wait until 2017, when we will be able to compare the 20-year forecast from 1997 CMO with the actuals of 2016 to be provided in 2017 CMO.

(1) In order to see the detailed split per segment differentiated between passenger and freighter aircraft, until the released of the full CMO, it is needed to use the exploring data tool offered in Boeing’s site.

(2) The differences in accuracy between the lower and higher end of the small-aisle segment should not be taken into account, as they are influenced by the different consideration of the cut off number of seats between a CMO and the other.

(3) Possibly a reason why Boeing plays down on the 747-8I and A380 segment.

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Wide-body mix in 16 years of Boeing CMOs

Last year I wrote a post showing the puzzling change in Boeing’s predicted mix of twin-aisle sales, between small and medium wide-bodies (“Wide-body mix in 15 years of Boeing CMOs”). A few days ago I wrote a post about the publishing by Boeing of its Current Market Outlook for 2014-2033. This year’s CMO is more consistent with last years figures, i.e., the larger share of the forecasted market corresponds to small wide-bodies (787s from Boeing perspective). Recall the numbers:

  • small wide-bodies: 4,270 a/c in CMO2014 (passenger aircraft only),
  • medium wide-bodies: 2,990 a/c in CMO2014.

However, the trend is changed again in this year’s CMO in comparison with last year’s one: small wide-bodies market decreases while the medium wide-bodies’ one increases again. Since I keep a collection of CMOs from years back, I will include again a comparison going 16 years back…

Twin-aisle mix distribution (Boeing CMO 1998-2014).

Twin-aisle mix distribution (Boeing CMO 1998-2014).

Seeing at the graphic (made using Boeing figures):

  • During the first 5 years (1998-2003) the trends are quite constant.,
  • From 2003 to 2007, the mix is reverted, possibly to favour the launch of the 787.
  • In 2008 the CMO did not provide the split.
  • From 2009 to 2014, you can see that both trends in the forecasts are erratic… why? Only Boeing knows.

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