Boeing and Airbus are used to volatility, due to the boom-bust cycles that have been typical of the airline industry throughout its history. However, the coronavirus-induced aviation bust of 2020 is shaping up to be the worst in memory, as demand for new airplanes plunged quite suddenly following years of strength.

The impact on the plane makers hasn't been equal, though. For Boeing, the pandemic is compounding the impact of the 737 MAX grounding, which has now surpassed 19 months. As a result, while Airbus is already recovering from the worst of the pandemic-induced demand drop, Boeing is still floundering.

A Boeing 737 MAX 9 flying over clouds

Image source: Boeing.

Aircraft demand has shifted in 2020

The COVID-19 pandemic has dramatically reduced aircraft demand, but it hasn't affected all types of aircraft equally. Demand for freighters has held up well, partly because a sharp drop in the number of passenger flights has reduced belly freight capacity. This has been good for Boeing, which dominates the freighter market. That said, freighters represent a very small part of the new aircraft market.

By contrast, demand for wide-body passenger aircraft has plummeted to extremely low levels. Travel restrictions have decimated long-haul international air travel. Most airline industry officials expect a very slow recovery in this market segment, so carriers are deferring deliveries to the greatest extent possible.

Demand for narrow-body aircraft has also fallen, but not nearly as much as for wide-bodies. Short-haul leisure travel demand in particular could recover substantially over the next year. But the grounded 737 MAX is Boeing's only passenger narrow-body jet family. In the near term, that means Airbus is in a unique position to capitalize on any recovery (however modest) in demand for narrow-body jets.

Airbus' delivery advantage grows

Sure enough, Airbus is distancing itself from Boeing's performance, thanks to a rebound in narrow-body deliveries. Of course, Airbus has maintained a massive lead over Boeing in commercial aircraft deliveries throughout 2020, due to the 737 MAX being out of commission. However, that lead swelled dramatically last quarter.

Quarterly Commercial Jet Deliveries

Q1 2020 Q2 2020 Q3 2020

Boeing (NYSE:BA)

50

20

28

Airbus (OTC:EADSY)

122

74

145

Data sources: Boeing and Airbus quarterly deliveries and earnings reports. Table by author.

In the first quarter, Airbus delivered 122 commercial jets, compared to just 50 for Boeing. Commercial jet deliveries plunged for both companies in Q2, but the decline was far worse at Boeing (down 60% sequentially) than at Airbus (down 39% sequentially).

The gap in performance widened substantially last quarter. Airbus delivered 145 commercial jets (including 57 in the month of September), significantly higher than its Q1 delivery total. By contrast, Boeing delivered 28 jets: still down 44% from Q1.

Both aircraft manufacturers delivered just 13 passenger wide-bodies for the quarter, a fraction of what they delivered in the prior-year period. Boeing's other 15 deliveries all consisted of military derivatives of commercial jets, while Airbus scored the win because it delivered 132 narrow-body jets during the period: mainly A320-family aircraft.

The divergence will show up in the financials

During the first half of 2020, Boeing and Airbus burned cash at a similar pace. Boeing reported cash burn of $10.4 billion, while Airbus burned 8.8 billion euros ($10.3 billion), excluding a one-time settlement related to bribery accusations.

It's impressive that Boeing managed to burn no more cash than Airbus in the first half of 2020 despite delivering far fewer commercial jets. However, it benefited from having halted 737 MAX production before the pandemic hit in full force, which meant it didn't suffer the same kind of inventory buildup as Airbus in the first half of the year. It also received $882 million of previously withheld payments from the U.S. Air Force: part of a broader effort by the government to keep key military contractors solvent.

In the third quarter, Airbus will benefit from production cuts and the strong rebound in narrow-body jet deliveries. As a result, it has a good chance of generating positive free cash flow. Meanwhile, Boeing will continue burning cash at a rapid pace, further weakening its balance sheet.

The 737 MAX will likely be recertified later this year, which will allow Boeing to chip away at Airbus' advantage on deliveries and start repairing its balance sheet. Yet with Airbus having 72% more commercial jet orders in its backlog than its U.S. rival, Boeing faces a very long road to recovery.