If you're a fan of Europe's Airbus (or parent company EADS), take a bow ... and take a seat. After taking that victory lap you just took, you must be tired.
As you've probably heard by now, Airbus just reported beating Boeing
Is bigger better?
Reporting delivery of 510 airplanes versus 462 for Boeing, Airbus beat its rival handily in the delivery race in 2010. By all indications, 2011 is looking good for Airbus, too. It signed contracts for sale of 574 aircraft last year (net of cancellations), valued at $74 billion in total. Boeing's total: 530.
So game, set, and match, eh? Airbus is the best, and in a race with only two contestants, that puts Boeing in last place, right?
Well, maybe. But that's not the point. Before they go all happy-happy-joy-joy over their victory, EADS shareholders might want to take a step back and consider the bigger picture here. I mean, the whole idea of running a business is to make a profit, right? A profit for the whole company?
Well, that's Airbus's problem in a nutshell. Yes, Airbus did more commercial business than Boeing in 2010 (its eighth straight winning year). Yes, it usually makes more money on its civilian planes (for two years running, Airbus Commercial has earned better operating profit margins than Boeing Commercial Airplanes). Yet Airbus as a whole is still struggling.
Boeing's combat air superiority
In both 2008 and 2009, Airbus lost money on its Military business, while Boeing's Defense Space & Security was solidly profitable. Companywide, over the 12 most recent months-reported, Boeing grossed 19.4%, which is nearly twice EADS's gross profit margin. At the operating level, Boeing earned an 8.1% margin while EADS lost money.
What all this tells me is that EADS isn't just beating Boeing commercially; EADS must beat Boeing commercially -- or else. Absent profits from its civilian business, EADS' military division would be failing. In contrast, despite ceding the "biggest" title to Airbus in 2010, Boeing's commercial division did pretty well for itself, pulling down an operating profit margin of 10% in the first nine months -- which was even better than its "military" business did.
In this contest between juggernauts, it seems to me Boeing has the decisive military advantage.
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