In the first five months of 2018, Boeing (NYSE:BA) booked 306 net firm orders for commercial airplanes. This represented a strong start, given that aircraft orders tend to be weighted toward the second half of the year. Boeing only captured 205 net firm orders during the same period in 2017.
Just a few days ago, I highlighted how Boeing continued its momentum with a recent order for 24 wide-body freighters by FedEx. I also discussed several additional orders that could be finalized at next month's Farnborough Airshow.
Yet Boeing investors didn't have to wait, as two completely unexpected aircraft deals were announced on Monday. The recent flood of orders will put Boeing in a good position whenever the next market downturn hits.
Boeing gets an order from a start-up
On Monday, Boeing announced a commitment for 20 787-9s from Bamboo Airways. All 20 orders are tentatively scheduled for delivery between 2020 and 2021. When finalized, this deal would push Boeing past 100 net orders for its popular 787 Dreamliner family in 2018 -- and the company has dozens of other 787 commitments waiting to be confirmed.
Bamboo Airways is a Vietnamese start-up that won't even begin operating until 2019. Clearly, there is some risk that this order won't come to fruition or will be delayed, given the difficulty of launching a new airline.
That said, Airbus (NASDAQOTH:EADSY) has made plenty of deals with start-up airlines in the developing world in recent years, which has proved a profitable strategy. Indeed, air travel demand is soaring in developing markets like Vietnam. If Boeing isn't willing to accept some risk to capture a piece of this business, Airbus will gladly step in.
Yet another order from a top customer in India
Also on Monday, Jet Airways reported a deal to purchase another 75 Boeing 737 MAX aircraft in an Indian regulatory filing. The carrier, which is a distant No. 2 in India behind fast-growing IndiGo, took delivery of its first 737 MAX last week and now has orders for more than 200.
Jet Airways seems determined to speed up its growth and regain market share it's recently lost. In fact, Jet Airways had doubled its 737 MAX order book just a few months ago, with an April order for 75 planes. Boeing should be happy that Jet Airways is being more aggressive, because several of its rivals in the fast-growing Indian market are Airbus loyalists.
Boeing can withstand a few bumps
One of the biggest risks that Boeing faces today is being shut out of China -- a massive growth market -- due to trade tensions. China centrally manages aircraft purchases for all its airlines and aircraft leasing companies, and has shown a willingness to use aircraft orders as leverage to strike back against potential U.S. tariffs on Chinese goods.
China isn't likely to defer or cancel any of its existing orders, as it would incur penalties for doing so. Besides, it needs more planes, and Airbus has substantial backlogs for its A320neo and A350 aircraft families. However, as long as the U.S.-China trade spat continues, China is likely to direct new orders to Airbus (and to a lesser extent, homegrown manufacturer COMAC).
Fortunately, Boeing's recent order wins across the globe will help it withstand even a prolonged pause in orders from China. Across most of its major aircraft programs -- and especially the 737 -- Boeing now has a healthy order backlog.
Looking further ahead, Boeing's rising order backlog will also help it avoid sharp production cuts when the next recession occurs. The longer the recent uptick in order activity lasts, the happier shareholders should be.