Shares of Airbus (EADSY) surged 9% on Thursday, after the European plane maker told suppliers to get ready for a rapid rebound in jet production. In fact, Airbus plans to boost output of narrow-body jets to record levels in as little as two years.

Boeing (BA -0.24%) stock also rose 4% on Thursday. Investors seem to believe that Airbus' aggressive production plans imply a robust aviation industry recovery that will lift demand for Boeing jets, too. Yet while narrow-body jet demand should fully recover by 2024, Airbus' plan also entails gaining market share from its American rival. Thus, Boeing shareholders shouldn't celebrate production increases at Airbus.

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Boeing vs. Airbus stock performance, data by YCharts.

Planning for record narrow-body production

Last year, Airbus slashed its commercial jet production as the COVID-19 pandemic crushed demand. By the end of 2020, it was building about 51 aircraft per month: 40 A320-family jets, four A220s, two A330s, and five A350s. Earlier this year, it bumped up the A220 production rate to five per month.

On Thursday, Airbus confirmed that it intends to boost production for the A320 family to 45 per month by the fourth quarter of 2021. However, it called on suppliers to prepare for A320 production to reach a record rate of 64 per month by the second quarter of 2023. Additionally, Airbus told suppliers that it hopes to boost the A320 production rate to 70 per month by early 2024 and as high as 75 per month in 2025.

Airbus also confirmed that it will increase A220 output to six per month in early 2022. Up until now, annual A220 deliveries have never exceeded 48 (i.e., four per month). Yet Airbus envisions building as many as 14 A220s per month "by the middle of the decade."

Gaining narrow-body market share

In one sense, Airbus' plans shouldn't be surprising. A320-family production topped out at 60 per month prior to the pandemic, but as far back as 2018, the aircraft manufacturer was interested in increasing output to more than 70 per month. Meanwhile, Airbus has planned to ramp up A220 output for years, thanks to a slew of orders from U.S. airlines that will be fulfilled from a new production line in Mobile, Alabama.

A head-on view of an Airbus A320neo flying over water.

Image source: Airbus.

Nevertheless, aerospace analysts had expected a much slower recovery in production rates. After all, most experts think global air travel demand won't return to 2019 levels until 2023. Since growth aircraft typically account for more than half of all commercial jet deliveries, many analysts expected aircraft demand to remain well below pre-pandemic levels until at least 2024.

Yet demand need not return to 2019 levels for Airbus to boost narrow-body output to record rates. Instead, it can rely on gaining market share at Boeing's expense. Indeed, Airbus ended April with 6,187 narrow-body jets in its order backlog, including over 5,600 A320neo-family aircraft. By contrast, Boeing's 737 backlog has fallen to just 3,239 units.

At the moment, Airbus' goal to boost A220 production to 14 per month is aspirational. At that rate, its current backlog of 494 unfilled orders would last just three years. By contrast, Airbus has enough A320neo-family orders to last for seven years at a rate of 70 per month. With a backlog that long, it's no wonder that the aircraft manufacturer is thinking about even higher production rates.

Boeing hopes to restore 737 output to as many as 42 per month by late 2022. That level of production -- 26% below the 57 per month rate Boeing was implementing prior to the 737 MAX grounding in 2019 -- should be sustainable. But barring a huge jump in orders that is unlikely to materialize, Boeing will never get close to building 63 737s each month, as it was contemplating in late 2018. Its current backlog would last barely more than four years at that production rate.

A Boeing 737 MAX in the Oman Air livery.

Image source: Boeing.

Wide-body demand remains weak

Whereas Airbus is poised to convert its backlog advantage over Boeing into an output advantage in the narrow-body market, the two plane makers' wide-body backlogs are evenly matched. Unfortunately for Boeing, wide-body demand remains quite weak and may never fully recover, due to the disruptive potential of Airbus' A321XLR.

In its recent production update, Airbus said it expects to continue building just two A330 wide-bodies per month for the foreseeable future. And while it plans to increase A350 production from five per month to six per month next fall, it had been building 10 A350s a month before the pandemic.

In short, Airbus' aggressive narrow-body production plans position it to seize market share from Boeing in that high-potential segment. Meanwhile, Airbus sees the current wide-body slump continuing indefinitely. Together, these developments suggest that Boeing's revenue, earnings, and cash flow will remain well below the highs reached in 2018 for the foreseeable future.