Will Boeing Lose $292 Billion and This Major Market to Airbus?

Artist rendering of the 737 MAX 8. Photo: Boeing.  

Up until 15 years ago, Boeing (NYSE: BA  ) was the undisputed top dog of commercial airline sales. Now, however, European Aeronautical Defense and Space's (NASDAQOTH: EADSY  ) Airbus is nipping on Boeing's tail, and while Boeing still maintains a bigger, active global fleet, Airbus is closing the gap. Further, in Latin America -- one of the fastest-growing commercial airline markets -- Airbus has outsold Boeing in five of the past six years. More importantly, in 2014, Airbus said it expects its market share to eclipse Boeing's. Here's what else you need to know. 

Airbus takes aim
In 2000, Airbus' commercial airline market share in Latin America was a paltry 12%. However, in 2014, Airbus expects its fleet to make up 52% -- and it expects its market share to continue to climb. According to Reuters, Rafael Alonso, executive vice-president for Airbus in Latin America, said: "We expect our market share should continue to increase in the coming years. A major achievement for us will be getting to 60 percent."

The VivaAerobus Group has signed a purchase agreement for 52 Airbus A320 Family aircraft (40 A320neo and 12 A320ceo), representing the biggest Airbus aircraft order by a single airline in Latin American history. Photo: Airbus.

More importantly, according to Airbus' latest Global Market Forecast, Latin American airlines will require 2,307 new aircraft between 2013 and 2032, which is estimated to be worth $292 billion. That's fantastic news for Airbus.

Boeing bites back
With Airbus outselling Boeing in Latin America in five of the past six years, it's easy to believe that Airbus will dominate that market. However, Boeing isn't going down without a fight. Donna Hrinak, Boeing's most senior executive in Brazil, said that one of the major factors behind Airbus outselling Boeing is the Airbus A320 neo, which had a launch date of December 2010. Hrinak said, "They came out first with their 'neo', which gave them a headstart on sales." By contrast, Boeing's 737 Max had a launch date of July 2011, so it's had to play catch-up.  

Further, Hrinak said that Boeing will continue to keep things competitive in Latin America, and with Boeing estimating that Latin America's fleet will almost triple by 2032 to 3,790 planes, there's no doubt that Boeing will live up to this promise. 

What to watch
Boeing is a massive company that gets a significant amount of its revenue from commercial airline sales. In addition, as of its third-quarter report, Boeing's backlog was $415 billion. But, as I previously wrote, Boeing has received a few blows when it comes to commercial airline sales -- arguably the most notable being the loss of Japan Airlines to Airbus. What this means is that while Boeing has a significant safety net, there's reason for investors to keep a close eye on Boeing. Airbus is continuing to show that it's a major contender when it comes to commercial airline sales, and Boeing might have to step up its game if it wants to continue being the top dog.

Further, the fight for Latin America is one that investors should especially keep a close eye on. Latin America is one of the fastest growing aviation markets, and if Airbus continues to eat away at Boeing's market share, that's a bad sign for investors. That's not to say it's time to bail on Boeing's stock, but it would be a good idea to continue watching Airbus' performance.

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Comments from our Foolish Readers

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  • Report this Comment On December 07, 2013, at 2:23 PM, alpine2013 wrote:

    No doubt, the headline is an "eye-catcher", but the facts on the ground are different:

    a) BA is a singularly focused aerospace company, with an ex-GE "deep dive" CEO, who knows what it takes to "execute", even if it involves, ever so deftfully, downscaling the "needle" and point it toward lower cost plants in SC;

    b) its supply chain partners like PCP, SPR, HON, UTX, etc are all hungry, to say the least, and they are all, also, "trained" to think and execute the Jack Welch way;

    c) when it comes to end--end design to production, BA can, I am sure, teach EADS a few things, including what to do with "materials", i.e. composite engineering, including the dreaded Archilles Heel, lithion-ion batteries;

    d) EADS is still running through EU's myriad of official, and "yes, unofficial" regulations, managed by unelected regulators, including some, yes, you guessed it already, British politicians who can't decide if they should become "pregnant" with EADS or BA orders, let alone whether the UK should be UK or maybe, it is better to be England and Scotland after all; and finally,

    e) the USD exchange rates are trending lower, giving BA a "not so natural, but still real" cost advantage to manufacturing the whole fleet of 737, 747-X00, 777-X00, 787....

    Need I write more, BA is all the way, warts and all,

  • Report this Comment On December 07, 2013, at 4:34 PM, danshoeco wrote:

    Simple answer. Boeing is a better aircraft. I'm not going if it's not Boeing...........!

  • Report this Comment On December 07, 2013, at 11:36 PM, rotorhead1871 wrote:

    Boeing will out deliver AB, which is the delimiter....AB cannot increase production, they are a government controlled jobs program. AB is currently MAXED out at a 9 year backlog...BOEING is not. and will continue to reduce its back log to 3-5 years...which is optimal. Boeing builds a better product, AB with its cheap cockpits and side stick is not at safe as the yoke design of all BOEING aircraft...AB is cheap and easy....they are in it to provide jobs FIRST...airplanes SECOND....BOEING is in it to provide the BEST aircraft in the WORLD....FIRST and foremost.

  • Report this Comment On December 08, 2013, at 8:48 AM, NicoV wrote:

    rotorhead's reply unfortunately clearly shows he doesn't know the aviation industry too well. First, the notion that Airbus 'cannot increase production' because they 'are a government controlled jobs program' is not only very self-contradictory (if it was a jobs program, increasing production would very much be their goal, as higher production = more jobs), it's also patently false. Airbus WILL increase production, with a decision to increase A32X output yet again expected soon, and production of the new A350 ramping up from next year on. Airbus has expressed the ambition to again overtake Boeing in deliveries in a few years' time, and they have the backlog to achieve just that. Airbus is also not a 'jobs program', Airbus is a highly competitive, and highly profitable company.

    Second, Boeing's backlog is almost as big as that of Airbus. It's a bit of an upside-down world though where apparently selling more planes is a BAD thing.

    The whole notion that Airbus is 'cheap' and 'unsafe' really is too silly to react to. Airlines worldwide consider both products to be pretty much on par quality and safety wise, and there is no real indication Airbus planes are designed or sold cheaper than Boeing's. It appears to me that rotorhead just took every US-centered Airbus cliché and threw 'em all together, to form a neat pile of uninformed silliness...

  • Report this Comment On December 08, 2013, at 10:39 AM, dlfillers wrote:

    How can anyone state that Airbus is cheap and "unsafe"?

    Jetblue flies all Airbus and Embraer jets, and they've had no safety problems.

    US Airways flies a huge fleet of Airbus aircraft, and they've had no issues.

    I've flown on both Boeing and Airbus.

    I think both aircraft are safe.

    People just state things that make no sense.

    Airbus aircraft has an excellent safety record.

  • Report this Comment On December 09, 2013, at 4:38 AM, mso88 wrote:

    If it ain't Boeing, I ain't going.

  • Report this Comment On December 09, 2013, at 8:51 AM, jackieonthetrunk wrote:

    It seems Motely Fool has had it "in" for Boeing with negative headlines with no real matching article. Might be the relationship with Yahoo, a pro-Administration, therefore in this case, pro-Union cause.

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