It was a defeat ranking right up there with the Baltimore Colts' loss to the New York Jets in Super Bowl III (or, if you're a fan of the other "football," maybe Brazil's yielding to Uruguay in the 1950 World Cup). Whichever comparison you choose, in the race to claim the crown of "most successful plane seller of 2014," Boeing (NYSE:BA) just choked.
Heading into December, Boeing had 1,380 gross plane orders and 1,274 net orders for 2014, beating Airbus' (OTC:EADSY) respective 1,328 and 1,031 order counts. But in a last-minute surge, Airbus upstaged -- and outsold -- its rival in the waning weeks of 2014.
According to its end-of-year update on plane orders and deliveries, Airbus last month booked orders for 468 new jetliners, far more than Boeing sold. As a result, Airbus notched full-year sales of:
- 1,545 single-aisle A319, A320, and A321 aircraft of both conventional and "new" engine configuration;
- 174 A330-family wide-body airplanes;
- 57 A350 long-haul jets (which compete directly with the Boeing 787 and 777); and
- 20 super-large A380 aircraft (comparable, but just barely, to Boeing's 747 line).
That's 1,796 gross plane orders booked for the year. Even subtracting 340 order cancellations left Airbus with a tally of 1,456 "net" plane orders. Thus, Airbus edged out Boeing's total net plane orders of 1,432.
Granted, Boeing beat Airbus in the contest to deliver the most planes, supplying its customers with 723 new jets in 2014 (Airbus' tally was 629). But going forward, Airbus has a bigger pipeline of planes ordered and awaiting construction, so it has the momentum in the deliveries race. According to the European company, its backlog now stands at 6,386 aircraft, versus Boeing's backlog of 5,789 jets.
What it means to investors
So what does all of this mean to investors in Boeing (and in Airbus)? If you'll forgive the head fake, I actually think this news might be good for Boeing and bad for Airbus.
Airbus trailed Boeing in the plane order race all year, only to pull off a win in December. Maybe this means customers that shunned Airbus (relatively speaking) all year long decided last month that Airbus' planes were better than Boeing's after all. I suspect, though, that these numbers tell us simply this: money talks.
A sales surge of the magnitude we witnessed in December -- again, this was 468 planes, or more than 26% of all planes Airbus sold through the entire year -- suggests Airbus wasn't exactly bargaining hard on the prices it charged for its planes. More likely, it underpriced its rival, sacrificing profits to secure sales and hoping to "make it up on volume."
That could be bad news for Airbus investors because in 2013, Boeing's commercial airplanes business recorded a 10.9% operating profit margin on $53 billion in revenue (according to S&P Capital IQ). Over the last 12 reported months, the division's profitability actually strengthened to a rolling tally of 11% profit margin on $57.8 billion in sales.
In contrast, despite booking sales similar to Boeing's ($53.6 billion in 2013), Airbus' commercial division earned less than 4.1% operating profit on plane sales that year. Airbus' profitability improved in 2014 as sales numbers tightened -- trailing 12-month results show an uptick to 4.6% operating profit margin on $51 billion. But if Airbus "gave away the store" to win sales in December, as I suspect it did, then those profitability gains could disappear in a hurry.
Long story short, I'd still rather be long Boeing than Airbus -- even after Airbus' photo-finish win.