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Boeing (BA) Beats Airbus on Orders, and on Profits, Too

By Rich Smith - Dec 9, 2014 at 3:33PM

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With similar revenues and similar sales success, how is it that Boeing thumps Airbus so soundly?

The clock is ticking down to the final days of 2014. And in these waning hours, Europe's Airbus ( EADSY 2.73% ) is making a last-ditch attempt to steal Boeing's ( BA 2.12% ) crown as "best-selling plane maker in the world" -- and steal away the glory from Boeing's coterie of aerospace and defense investors as well.

But can Airbus do it?

Airbus A320 neo orders are taking off! Photo: Wikimedia Commons.

Over the weekend, Airbus updated investors on a successful November that saw it book 248 new plane orders. Chief among customers for the month was U.S. airline Delta ( DAL 1.65% ), which placed a firm order for 25 A350-900 wide-body aircraft and a further 25 A330-900s -- which, when delivered, will nearly double the airline's fleet of A330s.

Counting these, Airbus has now collected orders this year for:

  • 1,173 single-aisle A319s, A320s, and A321s (an increase of 179 from last month);
  • 86 of the larger A330-class aircraft (40 more);
  • 49 wide-body A350s (up nearly 150%); and
  • 20 more megajumbo A380s (unchanged).

Add 'em all up, and gross orders for 2014 now total 1,328 jetliners. Subtract cancellations recorded so far -- 297 planes -- and you're left with Airbus' total net new orders for planes this year: 1,031. Says Airbus, these new orders "brought its backlog to more than 6,000 aircraft for the first time ever" -- and there's still three weeks left in the year.

How does this compare to Boeing?

Boeing's 737 is helping the company to maintain its lead over its rival. Photo: Boeing.

Boeing goes boom (like the dynamite)
Not bad, but not quite good enough -- at least, not if Airbus wants to catch up to its rival by year-end. Boeing released its latest report on airplane orders last week. Here's how they stand for the year:

  • 1,062 single-aisle 737 aircraft (lagging Airbus's single-aisle tally, but up by 105 planes since Thanksgiving);
  • 263 units of its 777 wide body (unchanged);
  • 49 new 787 Dreamliners (up one);
  • four 767s (unchanged); and
  • a single pair of 747 jumbo jets (likewise).

Altogether, Boeing grosses 1,380 plane orders for the year, just barely edging out Airbus.

You've got to know how to hold [on to] 'em...
Crucially, Boeing does a better job of holding on to those orders than its rival does. To date in 2014, Boeing has suffered only 106 cancellations of orders already placed. Result: its net orders for the year now stand at 1,274 jets -- 243 more more than Airbus can claim.

Boeing also holds an even bigger lead over Airbus in the race to sell bigger, bigger-ticket airplanes. To date, Boeing's orders for wide-body jets total 318 planes. In 2014, Boeing has taken in more than twice as many orders as Airbus for these more profitable jets.

Consider this: Airbus' A350 lists for upward of $250 million apiece, while Boeing charges $300 million and up for its similarly sized 777. Each A350 sold is worth two Airbus A320-series aircraft. But each Boeing 777 is worth three Boeing 737 MAX 8s. Boeing sells more big planes and almost certainly makes more profit from each wide-body sold.

The moral of this story
According to S&P Capital IQ, Airbus last year earned a 4.4% operating profit margin on $81.6 billion in revenue. Boeing, in contrast, earned a 7.4% operating margin on $86.6 billion.

So if you were wondering why Airbus and Boeing, rivals of similar size in sales and booking similar numbers of "gross" plane orders, are so vastly different in terms of profitability -- now you know.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

The Boeing Company Stock Quote
The Boeing Company
$210.25 (2.12%) $4.37
Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
$38.77 (1.65%) $0.63
Airbus Stock Quote
$29.73 (2.73%) $0.79

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