6/9/2014
By Jennifer Coombs, Research Analyst

If you really want to know that we’ve exited the recession, look no further than Boeing (BA), which has been a primary example of the recovery in US manufacturing. Also, airlines tend to replace and/or add new aircrafts during strong economic periods and that replacement period has been phenomenal for the aerospace giant. So much so, that Boeing is presently wiping the floor with its closest competitor – the European-based, Airbus. As the two largest commercial aircraft makers, Airbus and Boeing are in a constant tug-o-war for who can get the most orders, especially in the replacement portion of the business cycle. Thus far into 2014, Boeing is handily winning this game…

Last week, Airbus reported that as of May 2014 (the first 5 months of the year), they took in net orders for 203 new aircrafts, while Boeing received nearly double the amount of orders with 394 new aircraft request. Nearly all of the orders Airbus received were for the single-aisle, narrow-body jets (namely the A320 and the A321 family, as in the diagram from Airbus’ site pictured below) which have a far lower profit-margin than the jumbo jets. Airbus noted 196 deliveries for single-aisle planes, while Boeing only 193. For both companies, single-aisle jets are the cheapest to produce and sell. To make matters worse, Airbus also received about 306 order cancellations to date – that means that nearly one in three orders for Airbus aircraft gets cancelled. So far, Boeing has managed to have just 52 order cancelations out of the 448 orders that they received in 2014.

Overall, not only is Boeing getting more orders and less cancelations than Airbus, it is also physically delivering more airplanes. Deliveries-to-date for Boeing is currently at 271, while Airbus has only delivered 248. However, of the biggest planes in their respective fleets, Airbus noted 10 orders for the A380, compared to just 5 orders for Boeing’s 747, as of May 2014. Boeing also delivered forty 777s and 33 Dreamliners, so far in 2014.Following its annual shareholder meeting, Boeing reaffirmed FY14 guidance, plus noted a commercial airplane backlog of $374 billion and defense, space & security backlog of $67 billion. Later this year, Boeing will deliver its first of the 787-9 line to several airlines. Below is a photo from Boeing of the 787-9 maiden flight.

By the end of May, Boeing also reached an awesome new milestone; the 737 MAX program received its 2000^th order for the single-aisle aircraft. The week of May 20^th, Boeing received an additional 30 orders for the 737 MAX, and now has more than 2,010 orders from 39 customers worldwide, valued at roughly $209 billion at list prices.

Ultimately, Boeing is poised to lead the way in emphasizing the fact that the recession is officially over. This is also evident in the fact that the number of manufacturing jobs in the US has been steadily increasing with spikes in February and May. There should be a collective sigh of relief for now – industrials are in a major expansionary phase and this is great for all of the economy.

Jennifer Coombs
Wall Street Strategies

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