Last week, the global aviation community gathered in Dubai for the first major air show in two years. In previous years, Boeing (NYSE:BA), Airbus (OTC:EADSY), and their customers -- particularly airlines based in the Middle East and nearby regions -- have used the Dubai Airshow to announce massive aircraft orders.
Order activity was somewhat more muted at this year's Dubai Airshow, due to the continuing overhang of the COVID-19 pandemic. Airbus won the bulk of the deals that did materialize, helping it cut into Boeing's year-to-date lead on orders.
Two big wins for Airbus
At the 2017 Dubai Airshow, Airbus announced that it had reached a memorandum of understanding for its largest order ever: A deal with investment firm Indigo Partners for 430 A320neo-family jets. The aircraft were to be divided among four ultra-low-cost carriers (ULCCs) in Indigo's portfolio, including Frontier Airlines in the U.S. and Volaris in Mexico.
Image source: Volaris.
On the first day of this year's Dubai Airshow, Indigo Partners came back for more, signing a firm order for 255 A321neos and A321XLRs. ULCCs are rapidly gaining market share around the world, tapping into an unquenchable thirst for cheap air travel, and Indigo's portfolio airlines want to take advantage. Hungary-based Wizz Air and Frontier Airlines will take the bulk of the planes in this order (102 and 91, respectively).
Airbus only announced one other firm order this week: A relatively small deal with Nigeria's Ibom Air for 10 A220s. However, it also signed a letter of intent with Air Lease covering 111 aircraft: 25 A220-300s, 55 A321neos, 20 A321XLRs, four A330neos, and seven A350Fs. Of note, this represents the first public commitment for the new A350 freighter. Finally, Airbus and Kuwait's Jazeera Airways signed a memorandum of understanding for 28 A320neo-family aircraft.
Not much activity for Boeing
Over the past week, Boeing announced several deals for its services unit to convert passenger jets to freighters. But as for announcing new aircraft orders, the U.S. aerospace giant's performance at the Dubai Airshow paled in comparison to that of Airbus.
Boeing landed one significant order last week: A deal for 72 737 MAX jets from India's Akasa Air. Aside from that, it announced just two tiny orders: A pair of 777 freighters for Emirates and four aircraft (two 737 MAX jets, a 787-8 Dreamliner, and a 767-300 freighter) for Air Tanzania.
Image source: Boeing.
Moreover, Akasa Air hasn't even launched service yet. While the start-up is backed by billionaire Rakesh Jhunjhunwala and headed by an experienced CEO, Vinay Dube, there's no guarantee that it will succeed. The Indian airline industry has been marked by intense competition and a high failure rate. Rival budget airline IndiGo (not to be confused with the investment firm that placed the big Airbus order last week) is a formidable competitor and now holds nearly 60% of the domestic market. If Akasa Air can't make money, its orders could go out the window (as was the case for Dube's former company, Jet Airways, which shut down in 2019).
Closing the 2021 order gap
In the first 10 months of 2021, Boeing racked up 373 net orders for commercial jets, including changes in its estimates of orders likely to be canceled. That easily eclipsed Airbus' 125 net orders over the same period.
However, Airbus narrowed that deficit considerably last week. In total, it racked up over 400 commitments at the Dubai Airshow, including 265 firm orders for commercial jets, plus two orders for a military version of the A330. Boeing received just 78 firm orders.
Adding Boeing's Dubai Airshow deals to its previous net order total, it would have 451 net orders year to date. Meanwhile, Airbus is nearing 400 net orders for the year. And if Airbus can convert the commitments from Air Lease and Jazeera Airways into firm orders by year-end, it would leapfrog Boeing with over 500 net orders.
Crucially, Airbus entered the year with a massive backlog advantage over Boeing. The Dubai Airshow results simply reinforce the global aviation industry's preference for Airbus' A220 and A320neo families over the competing Boeing 737 MAX. That bodes well for Airbus making a full recovery from the COVID-19 pandemic, while leaving Boeing in an uncertain position.
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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November 20, 2021 at 09:07PM
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Airbus Beats Boeing for Dubai Order Activity - Motley Fool
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