The COVID-19 pandemic torpedoed demand for commercial jets last year, escalating the sense of crisis at Boeing (BA 0.40%), which was already struggling with the 737 MAX grounding and other quality-control mishaps. While most countries recertified the 737 MAX in late 2020 or early 2021, the U.S. aerospace giant is still burning cash at a horrific rate.
By contrast, Airbus (EADSY +4.57%) began to recover from the pandemic before 2020 had even ended. Airbus' solid first-quarter earnings results and its April orders and deliveries report both confirmed that the aircraft manufacturer is on the right track.
Another solid month of deliveries in the books
During the first quarter of 2021, Airbus delivered 125 commercial jets. A320-family aircraft accounted for the bulk of the deliveries (105). Airbus also delivered nine A220s, one A330neo, and 10 A350s. By contrast, Boeing delivered just 77 commercial jets during the first quarter.
Image source: Airbus.
Customers typically pay the bulk of an aircraft's purchase price upon delivery. That makes aircraft deliveries the most important driver of cash flow for Airbus and Boeing. Airbus' solid delivery activity enabled it to generate 1.2 billion euros of free cash flow last quarter, while Boeing burned $3.7 billion.
In April, Airbus delivered 45 commercial jets: three A220s, two A330neos, six A350s, and 34 A320-family jets. While this marked a slowdown from its March delivery total, Airbus typically delivers a disproportionate number of jets in the last month of each quarter (especially December). The April delivery total still represents an acceleration over the delivery pace Airbus averaged last quarter.
Order activity picks up
Airbus suffered more cancellations than new orders in the first quarter of 2021. By the end of March, it had booked 39 firm orders in 2021 while logging 100 order cancellations. The A220 backlog continued to grow with 19 net orders in the quarter, whereas the A320neo family recorded 97 cancellations against just 18 new firm orders.
The European aircraft manufacturer chipped away at this order deficit in April. It booked 48 new firm orders -- all for A320neo-family jets -- led by an order from Delta Air Lines for 25 additional A321neos. After accounting for 22 incremental order cancellations, Airbus reported 26 net firm orders for the month. Year to date, Airbus' net firm orders remain in negative territory at -35.
Image source: Delta Air Lines.
To be fair, Boeing has booked more orders than cancellations in 2021, giving it the lead in terms of net orders year to date. However, Boeing benefited from pent-up demand last quarter, as key customers that had held off on expanding their 737 MAX order books while that aircraft type was grounded finally placed new orders.
Despite a negative net order total year to date, the A320 family still boasts a remarkable backlog of 5,697 firm orders. Boeing's competing 737 MAX ended March with just 3,240 orders in the backlog. This discrepancy means that Boeing may never be able to return to the peak 737 MAX production rate reached in early 2019, whereas Airbus should be able to ramp up A320-family output to pre-pandemic levels within two or three years.
Airbus needs to turn orders into profits and cash flow
At this point, Airbus' biggest challenge isn't securing new orders or even convincing airlines to take delivery of the aircraft in their order backlogs. Instead, the company needs to focus on driving down costs to improve its profitability and cash flow.
In particular, Airbus has struggled to manage the complexity of producing numerous different A320-family variants simultaneously. This aircraft type will drive the bulk of Airbus' revenue production for the foreseeable future, making operational excellence imperative here. Meanwhile, the A220 is gradually gaining popularity with airlines, but Airbus needs to cut costs as it ramps up production to make the program profitable.
Investors shouldn't underestimate these challenges. Nevertheless, these are high-class problems to have this early in the post-pandemic recovery. That makes Airbus a far more attractive stock than Boeing right now.
