As we prepare to turn the final page on calendar year 2015, things are not looking good for Boeing (NYSE:BA). At least, they're not looking good for Boeing's chances of selling more airplanes than Airbus (NASDAQOTH:EADSY).
When last we checked in on this horse race, Airbus was leading Boeing by a lot more than a nose(cone), having booked 850 firm orders year to date versus Boeing's net tally of just 568 planes. Boeing made a valiant attempt to close the gap this week, but it looks to have fallen short -- and has given Airbus a chance to not just preserve, but extend, its lead.
Here's how the math works.
This week in Boeing: In through the out door
In its latest report on orders received through very early December, Boeing reported Thursday that it has received eight new orders for Boeing 737 single-aisle aircraft from "unidentified customer(s)" in the past week. At the same time, Boeing also said it recorded eight cancellations of 737s.
That would seem like just an unhappy coincidence if we didn't already know, from past conversations with Boeing, that "if there are an equal number of orders and cancellations [of 737 airliners], it is almost always an NG to MAX conversion" that has taken place. In other words, an "unidentified customer(s)" probably upgraded its/their existing order for 737 NG aircraft, electing to buy 737 MAX aircraft instead.
Now, that's not a total non-event. Your average 737 MAX 8 aircraft carries a list price $14 million greater than that on an equivalent 737-800 NG. Thus, converting eight such plane orders probably means an additional $112 million in revenues for Boeing. That's a whole lot more than nothing, but according to data from S&P Capital IQ, it still amounts to barely one-tenth of one percent of the revenues that Boeing collects in a year.
As far as the horse race goes, it leaves Boeing's position essentially unchanged. While the number of Boeing's gross plane orders has increased to 655 planes, the number of cancellations has also risen, to 87. That leaves net orders for the year steady at 568 planes.
This week in Airbus: The hits keep on coming
In contrast, Airbus had a whole lot more positive news to report Thursday. Specifically, multiple sources are reporting that Airbus has inked a $6.3 billion deal to sell 45 A320neo and 15 A321neo airplanes to Chinese discount carrier Spring Airlines Co Ltd.
In contrast to Boeing's announcement, these appear to be honest-to-goodness new orders, and not simply one type of airplane being switched out for another -- albeit slightly more expensive -- airplane. Airbus' success in winning Spring Air's business is also important because single-aisle jets like the 737 and A320 are -- by Boeing's own estimation -- the biggest market opportunity by far in the near-trillion-dollar market for Chinese airplanes during the next 20 years. Airbus just stole a big march on Boeing in this all-important market, and did it in a week when Boeing mostly stood still.
The upshot for investors
As far as the horse race goes, it's unlikely that Airbus will report the Spring Airlines aircraft in its November tally of new plane orders, which is due out any day now. Rather, these orders will more likely show up in Airbus' December end-of-year report, and thus have no effect on whether Airbus or Boeing is adjudged to have "won" the month of November.
The news is thus unlikely to immediately move Airbus' stock price, which, in fact, declined 2.5% on Thursday. As a result, the nice discount now available to buyers of Airbus shares -- selling for just 17.9 times earnings versus Boeing's 18.3 P/E valuation -- should hang around a bit longer.