Airbus (EAD) beat rival Boeing (NYSE:BA) in the aircraft order stakes at this year's Farnborough International Airshow by nearly twice as many orders and commitments. With this, the European aircraft manufacturer celebrates its second straight consecutive victory on a platform like this after achieving similar feat in the unofficial airshow competition after last year's triumph in Paris.
For years, the airshow has served as a platform for a sales race between the world's two major aircraft makers, who are having to cater to customers increasingly interested in new-generation, energy-efficient planes to offset huge increases in the price of jet fuel. Though Airbus clinched more deals at Farnborough, Boeing insisted that it has won more in the year to date. Boeing put its figure at 783 and Airbus' at 648. Airbus announced on Thursday that its orders and commitments at Farnborough for 496 aircraft were valued at $75 billion. Demand for its A320neo was particularly strong. Boeing, meanwhile, secured business worth $40.2 billion for 201 airplanes.
- Warning! GuruFocus has detected 4 Warning Signs with EAD. Click here to check it out.
- EAD 15-Year Financial Data
- The intrinsic value of EAD
- Peter Lynch Chart of EAD
Airbus' orders intake included the largely updated versions of its A330 wide body aircraft, which launched this week. Airbus says the plane is more fuel efficient and has a longer range to help it compete against Boeing's 787 Dreamliner. The analysts have put Airbus' win in part to the fact that the Airbus plane was sort of an old standby. The A330 has been selling well and is widely in use, making it simple to service and avoiding the necessity to train pilots on a new aircraft. Of the 496 orders and commitments Airbus announced this week, 369 were for the A320 family of planes, which generally seat up to 180 passengers. The A320 new engine option incorporates the latest technology together with sharklet wing tips that help deliver fuel savings.
Airbus's biggest order came from SMBC Aviation Capital, an aircraft leasing company that focuses on emerging markets. The company ordered 110 A320s equipped with the more fuel-efficient new engine option, and five A320s with the "current" engine option. Hong Kong Aviation Capital ordered 70 planes, including 40 A320neo models and 30 A321neos.
Not only the above stated facts but the performances of the two companies for the past two years suggest that Airbus has a stronger presence in the market. In order to understand the fact let’s run down these stats quickly.
For the second year in a row, Boeing thumped Airbus in terms of the number of airplanes delivered to customers. The 648 planes that Boeing flew off to its 85 separate customers in 2013 exceeded the company's 2012 tally by nearly 8%. Boeing beat Airbus’ performance (626 planes delivered) by 3.5%. We can find Boeing having a clear advantage under this head but only for smaller and lesser valuable airplanes.
Airbus won a more decided advantage in the contest to book new orders. In 2013, Airbus clearly won this race, grossing 6% more orders than Boeing, and losing far fewer orders to cancellation. On average, Airbus customers were about one-third less likely to cancel their orders than were Boeing's. As a result, Airbus ended the year with 11% more plane sales booked than its rival.
With so many more orders coming in, Airbus also has piled up a commanding lead in the contest to amass backlog. Airbus says it now has 5,559 aircraft waiting to be built -- a pile of backlogged orders $809 billion tall. In comparison, even Boeing's 5,080-airplane backlog looks a bit light.
And when you consider that Boeing's mainly been winning orders for smaller less valuable and single-aisle planes, Airbus's advantage in backlog may be even bigger than it appears. There cannot be just one ruler in any scene. Having said that, I’d like to add that it would be difficult for Airbus to beat Boeing.