For the past several years, Boeing (NYSE:BA) has reliably outpaced top rival Airbus (NASDAQOTH:EADSY) in terms of annual aircraft production. However, Airbus has accumulated a larger order backlog than its American rival. At the end of September, it had 6,749 unfilled orders for commercial airplanes, compared to 5,612 unfilled orders at Boeing.
Last week, Airbus commercial aircraft chief Fabrice Bregier boldly proclaimed that Airbus will overtake Boeing in terms of annual deliveries by 2020. Let's take a look at the two companies' order books and production plans to evaluate the likelihood of that occurring.
A close race in the narrow-body segment
In terms of raw numbers, the A320 and 737 narrow-body aircraft families dominate production at Airbus and Boeing, representing more than 70% of their combined output. Last year, Airbus delivered 491 A320-family aircraft, while Boeing maintained a slight edge with 495 deliveries of its stalwart 737 family.
Last year, both companies were officially producing narrow-body units at a rate of 42 per month. They are ramping up production over the next several years. By 2020, Airbus plans to build 60 A320neos per month, while Boeing intends to increase 737 MAX production to 57 per month.
On its face, that means Airbus would be building 720 A320neos a year, compared to 684 737 MAXs for Boeing. However, the actual gap would be smaller, in all likelihood.
On the one hand, Boeing's actual production typically lags its official capacity by a modest amount. Realistically, its annual output at a 57-per-month official rate would be 675 to 680 units. On the other hand, Airbus operates on an 11.5-month production calendar, so a 60-per-month production rate would translate to about 690 deliveries per year.
It's possible that Airbus could try to push production rates even higher to take advantage of its larger backlog. However, with annual order volumes trending down -- through the end of September, Airbus had only captured 317 net orders for the A320 family in 2016 -- the company is likely to be cautious about further rate increases.
Boeing looks to maintain strong wide-body production
The wide-body market has been Boeing's last bastion of dominance. In 2015, Boeing delivered 267 wide-body units, nearly double Airbus' total of 144 wide-body deliveries. However, Airbus' wide-body output is on the rise as A350 production ramps up. Meanwhile, Boeing will struggle to keep its wide-body delivery count at the historic highs reached in 2015 and 2016.
Production of the 787 Dreamliner has stabilized at 12 per month. With a backlog of roughly 700 unfilled orders, Boeing should be able to churn out 144 787s annually for the foreseeable future. An earlier plan to increase production to 14 per month will probably remain dormant, though, barring an uptick in demand.
Meanwhile, Boeing is ramping up production of the venerable 767 to a rate of 2.5 per month. Half of that production capacity is needed for Boeing's contract to build 179 aerial refueling tankers for the U.S. Air Force. Most of the rest will be used to deliver a steady stream of freighters to FedEx.
On the other hand, Boeing is slashing 747 production by more than half, to just 0.5 per month. It also plans to reduce the delivery rate for the 777 family to 5.5 per month by 2018, compared to 8.3 per month recently. Many analysts now believe that Boeing will need to cut 777 production even further.
Based on this outlook, Boeing will be delivering fewer than 250 wide-body units annually by 2018. Output could recover somewhat by 2020 as the new 777X enters service, but it will remain below last year's total of 267 unless Boeing has enough demand to raise 787 production to 14 per month.
Can Airbus catch up on the wide-body side?
Last year, Airbus delivered just 14 A350s. However, it hopes to deliver as many as 50 this year, while ramping up to a production rate of 10 per month by the end of 2018. That means it will be building up to 114 per year in 2020.
Airbus has expressed interest in pushing A350 production as high as 13 per month. Its backlog of 769 unfilled orders at the end of September could potentially support higher production. That said, order activity has been slow lately. (The A350 has just 33 net orders year to date.) If order activity remains weak, a production increase to 13 per month wouldn't be sustainable for very long.
On the flip side, demand for the Airbus A380 is plummeting. Airbus plans to deliver just 12 a year starting in 2018.
The A330 family is the big wild card. Production rates have been very unstable lately, reaching a high of 10 per month in 2013, but then falling to nine per month in 2015 and six per month in 2016, only to increase again in 2017 to seven a month.
In theory, the arrival of the A330neo in late 2017 should allow Airbus to ramp up production again. However, demand for the A330neo has been lackluster. Airbus has obtained just 186 firm orders, some of which are scheduled for delivery at least as late as 2024. It also has 150 unfilled orders for the current-generation A330. That may be enough for Airbus to maintain the new seven-per-month rate, but it can't raise production without a big influx of orders.
Thus, barring a rebound in demand for wide-body aircraft, Airbus is likely to be delivering a little more than 200 widebodies annually in 2020. That would be up by more than 40% from 2015.
Can Airbus deliver?
Airbus is poised to dramatically narrow the gap between its output and that of Boeing. On the narrow-body side, it is on track to outpace Boeing's annual production by 10 to 15 units by 2020.
However, Boeing is likely to maintain its wide-body lead for the foreseeable future. Based on currently announced production plans, Boeing would deliver at least 40 more wide-body units than Airbus on an annual basis in the 2019 to 2020 period. Even if 777 deliveries briefly dip as low as four per month, it would still maintain a sizable lead over Airbus.
The most plausible way for Airbus to overtake Boeing by 2020 would be to ramp up A320neo production beyond 60 per month. That's probably not a good use of capital, though. Delivering the most airplanes is a point of pride, but the real goal is to deliver a good return for shareholders. In that respect, Airbus and Boeing both have bright prospects.