Thursday, June 19, 2014

The Max Bubble Keeps Growing

Boeing has just updated its order book with 15 and 80 orders to Turkish Airlines and unidentified respectively. That is a total of 480 NG/Max orders this year where orders for all types  is 489 in total. 98% are the 737 variety. What does this mean is the context of the blog today.

Remember that last year was a extremely robust year for 737's including a preponderance of Max 737 orders. Boeing had a long journey to go catching-up Airbus Neo since it started 15 months after the NEO. The NEO jump started with all its existing customers in great quantity. Boeing threw the Hail Mary Max pass and caught it with the MAX.

737 Order Book Balloons in 2012 and 2013

2010    475 (NG only)
2011    580 (150 Max) December *
2012  1171*
2013  1208*
2014    480**

*   Max order years added to the books
** Partial year including June orders to date

The Max years has made its case that Boeing is on to something very special. Customers are given the inside scoop on the Max. They really like what they see. Boeing accommodates customers with transitioning orders taking NG's to Max split order bookings. Not all orders in the asterisk years are MAX but the significant part of 2012-2014 YTD belong to the Max. There have been a total of    3,439*  737 added to the books since the Max was announced. Close to two thirds are the Max when considering 2011 had the initial Max order of 150 in December and most of 2011 737 bookings were NG orders.

The Max balloon is not about to burst, as unannounced and commitments are not factored in on theses numbers at this time. Airbus may pride themselves on the NEO, orders, since it is  its job to do so. However, the steady pace of Boeing Max would be disturbing for the Neophytes. If Boeing book reaches a thousand 737 in 2014 , it would be a remarkable testament to its Max concept and the customer's understanding of that same concept. Reputation has a lot to consider for the customer. As Boeing originally announced for the 787 project that it would gain 15% fuel advantage but ends up with a 21% fuel advantage in some cases, then the Boeing reputation carries forward with the Max where they have announced a 13% advantage over its competitors current models and then a 6% advantage over its NEO offering. Airlines for Airbus may rationalize its too expensive to reequip, retrain and re market a NEO fleet over to a 737 fleet. However, they may find that bleeding slowly is the way to go. The 737 Max got the message out to its potential customers and is loading up in China in numbers (Hint unidentified list). China has not signed an oath of allegiance yet on single aisle types. They have older equipment or mixed fleets so they are more free than European counterparts when selecting the Boeing 737 Max. China may take on some 737 NG's for instant gratification when updating the China based fleets while waiting for Max delivery.

When will the Max sweep past the NEO in Numbers? That should occur in late 2015, Airbus will be perplexed with stagnant orders for both the A350 and A380 in 2015. The Neo will have maximized its customer base as those in the undecided arena choose more Max for a third consecutive year. Toulouse announces a new production facility near Waterloo.