Boeing Loses Billions, and 2 Loyal Airlines, to Airbus

Boeing 737. Photo: Wikimedia Commons. 

In October, two of Boeing's (NYSE: BA  ) loyal airlines, Japan Airlines and Mexican airline VivaAerobus, placed orders with Boeing's chief rival, European Aeronautical Defense and Space's (NASDAQOTH: EADSY  ) . In October, Airbus outsold Boeing. Is it time to worry?

Clash of the titans
The two titans of commercial airline sales have battled with each other for years, with Boeing more often than not coming out on top. However, October was not Boeing's month. First, VivaAerobus placed an order for 40 A320-family jets -- a deal worth an estimated $4 billion, and then Boeing lost the JAL contract to Airbus -- estimated to be worth $9.5 billion (although discounts are likely). This came with the added displeasure of jeopardizing Boeing's manufacturing arrangements with Japanese manufacturers Kawasaki, Mitsubishi, and Fuji. 

Further, these losses were compounded by the fact that this year Airbus has outsold Boeing. As of October, Boeing had sold 1,102 jets. Airbus had sold 1,286.  

Billions to the rescue
Airbus' victory over Boeing in commercial airline sales is clearly not great news for investors. However, it's also not time to panic. In its latest quarterly report, Boeing's commercial airline third-quarter revenue increased to $14.0 billion. Plus, operating margin improved to 11.6% on higher delivery volume and continued strong operating performance. Moreover, Boeing reported that it booked 200 net orders during the quarter for commercial airplanes, and backlog remained high, with 4,800 airplanes valued at a record $345 billion. 

What to watch
It's worrisome that Airbus would take two of Boeing's airlines and beat it in orders, as it shows that Airbus is kicking the competition -- and doing a good job at that. However, Boeing is completely up to the challenge, and I imagine it'll come back fighting. Further, for its latest third-quarter results, Boeing had a total backlog of $415 billion, a revenue increase of 11% thanks to higher commercial deliveries, and an operating cash-flow increase of $4.3 billion. Consequently, Boeing has a significant safety net -- for now. If Boeing continues to lose key customers to Airbus, or any other airplane manufacturer, it might be time to re-evaluate your holdings. But for now, there isn't cause to panic.

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Read/Post Comments (16) | Recommend This Article (16)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 10, 2013, at 11:40 AM, tdizz wrote:

    Now none of us saw the contract proposals but I bet the biggest issue was with the delivery delays because Boeing hasn't increased production capacity due to worrying more about quarterly reports and share value. This is becoming the bigger reason why US corps are losing out to foreign firms.

  • Report this Comment On November 10, 2013, at 12:50 PM, mickeyfinn234 wrote:

    Maybe it's time to worry about the government's involvement in business on behalf of unions. Right now Boeing is having problems in Seattle with a mandatory minimum wage issue and government involvement in their business. Let free markets reign and prosperity will follow. Although, that does mean that people will have to work and think for themselves.

  • Report this Comment On November 10, 2013, at 1:03 PM, Lyezun wrote:

    mickeyfinn234, you're totally ignorant on your comments. Boeing is not having a problem with any mandatory minimum wage or government involvement. Next time stop to think before you post such drivel, if you're capable of actually thinking at all.

  • Report this Comment On November 10, 2013, at 1:58 PM, Jamro wrote:

    The Airbus is a much smoother ride, more comfortable seats and more legroom... Also, according to my niece, who is a flight attendant, the Airbus is more user friendly for both flight attendant and passengers.....

  • Report this Comment On November 10, 2013, at 2:02 PM, Jamro wrote:

    737's are great for those tall people that love flying with their knees up around their ears....

  • Report this Comment On November 10, 2013, at 2:55 PM, plange01 wrote:

    boeing not grounding its NIGHTMARE LINER may just destroy the whole company...

  • Report this Comment On November 10, 2013, at 2:56 PM, unotsosmart wrote:

    jamro the seats are chosen by the airline, not the manufacturer. Various independent companies make seats, not airbus or boeing. so your comment does not make sense, but of course your comments are not based on facts.

  • Report this Comment On November 10, 2013, at 2:58 PM, unotsosmart wrote:

    yes, not grounding a plane with 1000 orders is a terrible idea. where do you people get your education (or lack of)

  • Report this Comment On November 10, 2013, at 3:58 PM, kcisobderf wrote:

    Boeing screwed up and outsourced major parts of the aircraft construction. They *should* worry, and so should every other US company so keen on outsourcing.

    You save money now, but lose technical and institutional knowledge. And damage the nation that helped you grow.

  • Report this Comment On November 10, 2013, at 5:55 PM, NYWolf1 wrote:

    The fact is the Boeing 737 fuselage is slighlty narrower than the Airbus 320, the high density seating used on the 737 has to be narrower thus less shoulder room. This was a conscious decision made by Boeing when they developed the next gen 737s, as it gives them a slight econmy edge at the expense of passenger comfort. This was OK when the 737 was short haul but now they are transcontinental it is not so good. I am a typical regular business traveller and the fact is on long domestic flights say East to West Coast, I deliberatley avoid 737 flights and always go with A320 flights purely for this reason.

  • Report this Comment On November 10, 2013, at 6:29 PM, 737pic wrote:

    To NYWolf,

    When comparing the cabin width, the A320 is wider at knee level, but the two cabins are of exactly the same width at armrest level. The 737NG wall is flatter, and due to curvature, the A320 wall actually encroaches more into the top of the seats. I believe that the source of info was Boeing, so like anything in Seattle vs. Toulouse/Hamburg, take it as it comes. I don't want to start another international incident, but I found the data interesting.

  • Report this Comment On November 10, 2013, at 7:32 PM, Pierredakota wrote:

    Ever since McDonnell Douglass people took over Boeing on a hostile trading stocks trading. Then theses executives move Boeing headquarters out of Seattle. Now they are hoping to remove Boeing out of Washington State to South Carolina. Ha ha ha ha these are the real problem of the real American commercial airplanes manufacturers. Greed and power has been the self destruction of the whole affair. We the Americans people we need to come up with a new Air planes manufacturers. We used to have Hughes, General Dynamics, Lockheed, McDonnell-Douglas, and Boeing. Why now we only have Boeing who is on a decline due to the mergers and stock buy out. We need to start a new one. I bet if Bill Gates, Paul Allen, Warren Buffet. T Pikens and many others putt together to save the industry from completely vanish from the USA to China, Japan and Europe. It is happening. Sad sad it is hurting me and my pride.

  • Report this Comment On November 10, 2013, at 9:38 PM, rotorhead1871 wrote:

    government funded airbus blew out everyone but Boeing.......

  • Report this Comment On November 11, 2013, at 1:09 AM, fisquid wrote:

    Cash flow and operating margin will always look good as long as there is a backlog of orders. Those numbers only require that Boeing continue making airplanes that it has already sold. Easy money.

    Boeing's sales problem isn't a sales problem at all. It's a conscious decision on their part to save money by investing less in R&D. This produces greater short term returns. But you can see where it is headed. Aerospace requires absolutely massive investment in R&D to compete... and the consequences of failing to make those investments will not show up for many years.

    But that's not to say they won't show up. The 747-8 derivative took longer to develop than the original 747 did. This does not bode well for their ability to keep new planes coming. But of course that's just an anomaly and they had no trouble at all with the development of the 787, right? Expect that the future holds more of what the present holds: great manufacturing, but horrible execution of design work.

    Nevertheless, Boeing will continue to be wildly successful until its older designs stop selling, at which point we will realize that they have given up the ability to come up with new designs in a timely fashion. Unless they completely change their focus and start rebuilding their development ability, this will eventually spell the end of the company's salad days.

  • Report this Comment On November 11, 2013, at 3:00 AM, Groniad wrote:

    Don't worry. If the Boeing commercial aircraft branch fails, the company will be kept afloat by huge governmental orders, like military tankers or whatever, in which they cannot lose. But even in commercial aviation, success is virtually guaranteed as long as the U.S. government acts as an extended Boeing sales force in various countries. Surely, so do the Europeans for Airbus. Same game. Nothing to worry.

  • Report this Comment On November 11, 2013, at 2:06 PM, caprioli54 wrote:

    VIVA AIRBUS VIVA EUROPE

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