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What to Expect From Aircraft Makers in 2018

By Motley Fool Staff - Feb 12, 2018 at 11:55PM

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Boeing and Airbus both had record years for deliveries in 2017, and demand doesn’t seem to be slowing down.

The aircraft industry is coasting on the tailwinds of increasing demand for planes. In this Industry Focus: Energy clip, host Sarah Priestley and Motley Fool contributor Adam Levine-Weinberg tell investors what they can expect from Boeing (BA -1.25%) and Airbus next year. Tune in to find out what we know about demand for 2018 and 2019, how long we can expect to see this growth trend continue (at least), which company is slated for more deliveries for the next few years, what growth looks like for the different models of planes, from the 787 Dreamliner to the A350 jet, and more.

A full transcript follows the video.

This video was recorded on Feb. 8, 2018.

Sarah Priestley: What are you expecting for 2018 for both of these companies?

Adam Levine-Weinberg: We're definitely going to see more growth for Boeing and Airbus. I think, in 2018 specifically, we'll probably see slightly higher production growth for Boeing. I'll get to the reasons for that in just a moment. Both companies are in the midst of increasing production on multiple product lines to meet this high demand that they've seen. Airbus, for example, is in the midst of the initial ramp-up period for its A350 jet. The first deliveries were just a few years ago. It usually takes a while as they work out the manufacturing kinks to get to the full production speed. This year, they're supposed to reach that, which is going to be 10 a month by the end of the year. Based on that production rate, they'd be building somewhere between 110 and 115 A350s on an annual basis as of 2019, whereas last year they delivered 78 A350s. Meanwhile, the A320 production rate is set to reach 60 per month in 2019. That's the fastest that any commercial jet has ever been built. That's up from 50 per month right now. So, that's going to be a big increase, but that's not coming during 2018. That'll be a 2019 thing.

Meanwhile, Boeing is in the midst of producing the 737 family of jets faster. They ramped up from 42 per month to 47 per month for 2017, and they plan to increase production to 52 per month later this year, and then up to 57 per month in 2019. Then, finally, Boeing also decided late last year to increase the 787 production rate from 12 per month now to up to 14 per month as of sometime in 2019. The result of all of that is that Boeing said it's going to deliver 810 to 815 jets in 2018, which would be up 6% to 7% year over year. There will be a little bit of growth on the 787 Dreamliner, but that's just going to be offsetting lower production for that 777, which, as we talked about earlier, is having a bit of a slowdown and a model transition. The vast majority of the growth, probably 100% once again, will come from that 737 family as the production rate goes up by five aircraft per month.

As for Airbus, it's also going to be increasing deliveries this year, but probably not quite as much as Boeing, just because that A320 family has now stabilized at 50 per month, and the ramp up to 60 per month is really going to happen more in 2019 than in 2018. And looking further out, you're going to see annual delivery totals for both Airbus and Boeing continue to increase year after year, at least through 2020, just based on the production announcements that they've already made. And when you look at the giant backlog that both companies have right now, you can certainly imagine either Airbus or Boeing increasing production for those high-volume A320 and 373 families yet again. Maybe not in 2020 because of these supply chain constraints, but possibly 2021 or 2022.

Priestley: It's a good position to be in, to have so much demand that you're struggling to make it. But, I know it can be incredibly stressful for the people on the shop floor that actually have to make these.

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