Will Boeing Lose $1.9 Trillion, and This Major Market, to Airbus?

Boeing Completes 737 MAX 8 Firm Configuration. Photo: Boeing. 

On Feb. 9, Boeing (NYSE: BA  ) released its 20-year market forecast for the Asia-Pacific region. The good news is the 20-year market for new airplanes is valued at $1.9 trillion. The bad news is Boeing faces stiff competition from its chief rival, European Aeronautical Defense and Space's (NASDAQOTH: EADSY  ) Airbus. Here's what else you need to know.

When giants fight
In it's long-term market report, Boeing states, "During the next 20 years, nearly half of the world's air traffic growth will be driven by travel to, from, or within the Asia Pacific region." For Asia-Pacific airlines, that growth equates to 12,820 new airplanes, valued at $1.9 trillion. That adds up to 36% of the world's new airplane deliveries over the next 20 years.

A320neo BOC. Photo: Airbus.

Further, the demand will be highest for single-aisle airplanes, like Boeing's 737 MAX and Airbus' A320neo. The good news is last year, Boeing delivered a record 143 planes to China; the bad news is Airbus still has the lead when it comes to market share and orders, in the Asia-Pacific region.

According to Airbus' Asia-Pacific Market update, In 2013, Airbus' net market share in the Asia-Pacific region was 82%, compared with Boeing's 18%. Further, when it comes to single-aisle airplane orders and customers in that region, Airbus' A320neo had 12 customers, with 912 orders, while Boeing's 737 Max had 3 identified customers, with 255 orders -- not exactly the best news for Boeing. 

Airbus vs. Boeing
Airbus' 2013 Asia-Pacific lead over Boeing's is impressive, but CNN reports that when it comes to actual deliveries to the region, Airbus' deliveries were not significantly higher than Boeing's. However, CNN also reports that Airbus' Asia-Pacific backlog is 1,740 planes, while Boeing's is "around 1,000" planes. Of course, that doesn't mean things can't change. According to CNN, David Steward, aviation analyst and vice president of ICF International, said: "I firmly believe that these things tend to balance themselves out and that one year Airbus will have a good year, and some years Boeing is well ahead. It's all about timing in terms of where they are in their product cycles." 

Airbus A320neo CFM V08. Photo: Airbus.

Still, Airbus has made significant improvements when it comes to global market share. According to the Centre for Aviation, in 1995, Airbus' world market share was 18%, and Boeing's was 82%. In 2013, Airbus' world market share was 53%, and Boeing's was 47%.  True, over the past decade, the two companies have gone back and forth when it comes to market-share lead, but the fact that Airbus has improved from 18% to 53% is impressive -- and possibly concerning for Boeing.

What to watch
Both Boeing, and Airbus stand to make a significant amount over the next 20 years. However, for investors, one area to watch is the Asia-Pacific region. We're talking about a considerable amount in $1.9 trillion, and my bet is that both companies will be fiercely competitive when it comes to sales, and market share. In 2013, Airbus won, but that doesn't mean that can't change in the future. Conversely, the other thing to watch is actual deliveries to the region. Orders and backlog are important, but only if a company can deliver. Consequently, if either company starts to show signs of failure to deliver, or continued erosion of market share, you might want to take a closer look at what's going on and re-evaluate your holdings.

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Read/Post Comments (7) | Recommend This Article (10)

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  • Report this Comment On February 16, 2014, at 12:29 PM, nubbadub wrote:

    Boeing had 18% net market share last year. Boeing has orders of 255 out of a total off 1176, so that is about 21.8% > 18% which means that Boeing could take market share away from Airbus.

    So the answers are: no, Boeing won't lose $1.9 trillion and no, Boeing will not lose a market that it doesn't own. Boeing is gaining in that market, so the question is how much will Airbus lose?

  • Report this Comment On February 16, 2014, at 4:31 PM, plange01 wrote:

    boeing already has over a 20 YEAR! back log in orders and could 10 TRILLION and still have more business than they can handle!

  • Report this Comment On February 16, 2014, at 5:54 PM, Sunil01 wrote:

    20 year back log ? No way. 10-12 years, 15 years possibly for orders that get pushed back, but not 20. And most certainly not $20 trillion worth. That's larger than the US GDP from one company. Are you kidding me ? Where do you come up with this nonsense ?

  • Report this Comment On February 16, 2014, at 6:59 PM, gasplay wrote:

    Orders are one thing deliveries are another and if you need planes Boeing has a shorter backlog and doesn't need to give them away. So unless you can wait almost 10 years instead of 5 buy a Airbus.

  • Report this Comment On February 16, 2014, at 7:08 PM, gasplay wrote:

    Boeing backlog is 441 billion and Airbus is 800 billion at the present time in US dollars.

  • Report this Comment On February 16, 2014, at 7:35 PM, etsosie wrote:

    Boeing and Airbus seem to be balancing around 50%. It seems they reached the top of the allowable market shares based upon production capabilities. Only way to increase this is to build more production capacity, but that will not likely happen. Large companies like Boeing and Airbus tend to depend hugely on their suppliers for everything. Those suppliers will only product as fast as economically possible. Supply chains are where the battle is.... In a twist of this, some suppliers are largely becoming suppliers to both Boeing and Airbus. You will soon be seeing more players in the market to take from that... Like the new C Series from Bombardier, Mitsubishi or Embraer... Note, market share is for all flights and lengths... so not limited to Narrow or Wide body aircrafts...

  • Report this Comment On February 17, 2014, at 3:07 AM, doogiedoo wrote:

    The problem for Boeing is that the A320neo is in a different league to the 737MAX. The economics of the plane are better and it offers airline customers a superior flying experience. So Airbus will continue to win over Boeing, the question is what effect the other entrants into the narrow body race (Bombardier, Sukhoi etc) will have - though they do not feature in your article they could be formidable and this will not be a straight two way fight between Boeing and Airbus. Unfortunately for Boeing I think the effect will be that it gets squeezed even further as I think the Airbus market share will prove to be more resilient......

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Katie Spence

Katie Spence has been a financial journalist for The Fool since 2011. She specializes in defense companies, “green" technology, autos, and robots. Follow her on Twitter for breaking news in the defense, auto, and robot industry.

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