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Boeing: Still Losing Ground to Airbus

The aerospace giant has struggled to keep pace on aircraft deliveries

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John Engle
Sep 21, 2021

Summary

  • Boeing is still recovering from the long grounding of the 737 MAX, as well as from the disruptions of 2020.
  • Boeing's deliveries have fallen short of those of its European rival, Airbus.
  • Several airlines that were once Boeing stalwarts have switched to Airbus in recent months
  • Boeing has returned to profitability, but remains some distance from its pre-crisis normal.
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When deliveries of the 737 MAX 8 first began in May 2017, it seemed to mark the start of a promising new era for the Boeing Co. (

BA, Financial). Unfortunately, that bright vision of the future was darkened in 2019 by the revelation that the next-generation passenger aircraft suffered from a critical design flaw, one that had already resulted in the catastrophic crashes of two planes. Grounded from May 2019 to December 2020, the 737 MAX was transformed from a profitable buoy for Boeing’s fortunes into a painful and costly millstone.

While Boeing has managed to put much of the 737 MAX crisis behind it, the stain on its brand has proved slow to fade. Despite its subsequent return to service, lingering distrust of the 737 MAX design has continued to weigh on sales, with signs of growing willingness among airlines to consider rival Airbus SE (

XPAR:AIR, Financial). All of this has raised the question: can Boeing continue to hold the line against its European rival?

Hopeful summer rays give way to autumnal gloom

There were some promising signs for the 737 MAX during the summer months of 2021. In June, Boeing received orders for the aircraft to the tune of 219 units, 200 of which came from a single buyer, United Airlines Holdings Inc. (

UAL, Financial). Unfortunately, there was little apparent momentum heading into July, which saw Boeing add 19 aircraft to its 737 MAX order tally. That result barely moved the needle overall, however, coming as it did alongside 15 cancellations.

August, meanwhile, was a decent showing for Boeing, seeing 35 net new orders and 14 deliveries of the 737 MAX. That brought Boeing’s 737 MAX delivery total to 169 since the aircraft returned to service last December. Complicating matters further in August was the rising prospect of Chinese economic issues ranging from an incipient domestic debt crisis to mounting international trade tensions.

September thus far has offered fresh cause for concern, especially its failure to come to terms with Ryanair (

LSE:RYA, Financial) for the sale of dozens of 737 MAX aircraft. On Sept. 6, Ryanair made a rare public announcement that it had decided to walk away from the months-long negotiation, having failed to come to terms with Boeing on price. Remarkably, Ryanair abandoned talks despite its stated need for as many as 250 equivalent aircraft. Had Boeing been able to secure the full order, it could have raked in more than $30 billion from the deal. Given that Ryanair has been Boeing’s top 737 MAX customer to date, I find it hard to interpret the result as anything other than a serious blow for Boeing.

Boeing’s loss may be Airbus’s gain

Overall, Boeing has lost considerable ground to Airbus in the battle over aircraft manufacturing supremacy. As CNBC reported on Sept. 14, Boeing’s deliveries have badly lagged those of its European rival all year:

“For the year to date, Boeing has delivered 206 aircraft. European rival Airbus delivered 40 jets in August to bring supplies of its new jets to 384 since the start of the year, remaining broadly on course to meet an annual goal of 600 deliveries, which would preserve its crown as the No. 1 aircraft manufacturer.”

Perhaps unsurprisingly, Airbus has been the biggest beneficiary of Boeing’s recent woes. In August, Airbus beat out Boeing for a 16-aircraft order from Condor, a niche leisure airline. In September, longtime Boeing stalwart Jet2 publicly changed allegiance with a 36-plane order from Airbus worth $4.9 billion.

While Boeing comes off a bit better on the comparative of new order book growth, it still leaves much to be desired, in my view.

My take

Boeing has struggled to restore both its reputation and finances in the wake of a cascade of crises first triggered by the 2019 grounding of the 737 MAX. Efforts to reestablish normalcy were stymied first by slow progress on recertification of the 737 MAX, and then by the severe disruptions to air travel precipitated by the lockdowns and travel restrictions last year.

Despite the continued challenges facing Boeing, which admittedly extend beyond the rehabilitation of the 737 MAX, there is some reason to be hopeful about the name, in my assessment. The company finally broke its long streak of losses in the second quarter, returning to profitability after six consecutive quarterly losses.

Boeing remains very much a work in progress, but it is one I think is worth keeping an eye on.

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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