Sunday, January 3, 2016

The Big IF for Boeing

The single aisle wars took a turn against Boeing during 2015, the A320-321NEO outgunned the 737 MAX during the year. That wasn't supposed to happen and even Boeing aficionados are left wondering what happened. An analysis has started by Boeing on what to expect next year, and what's going on where they didn't shrink the Airbus lead over the MAX. Before any bridge jumping starts by Boeing execs, let's us try to spin an answer.

  • The big picture is the very big picture, is a solace in any industry
  • The lead in the market is something first places loses not what second place takes.
  • 2014 spent Boeing energy dampening 2015's potential
  • Is the Max really the MAX
  • Let's see what 2016 does before resigning and base jumping from buildings without a plan

Starting with the big picture point, it’s a marathon not a sprint kind of approach allows for off segments of time. Boeing hit the hill a little later than Airbus in this race, as Airbus was sprinting downhill on the course. Is this notion an imaginary hopefulness of wishful thinking on Boeing's part or is Airbus turning a positive corner for its single aisle going way beyond Boeing's own expectation?

The answer is so complex where "time" shakes out the truth on the matter. The Winging It take: is about the A320NEO entry into service during January 2016 causing a market ordering flurry in 2015. Emboldened purchasing by more Airbus customers and some new Airbus customers, and adding orders during the 2015 line-up? 

Otherwise getting in-line sooner rather than later, while amping up orders for the NEO before its entry into service arrived. 

In summary, a trickle down impact occurred for Airbus, as the entry into service factor joined the market. The Max is now facing a order saturation with the market sponge before its own entry into service arrives. The Max will increase its sales during its moment of entry, but will have less market absorption room because the NEO was first to enter service.  

However, the other take is the Airbus NEO was a better deal for the customer. The big picture numerator over the time denominator will say who is right on this matter.

Having a lead in time and space remains up to second place to take away from the first one out with the single aisle announcement. The 787 vs A350 battle proves there is merit with this assumption. Boeing jumped first with an all new plastic concept of the unproven wide body. It now maintains a lead over Airbus by a significant margin as its lead is 1,142 to Airbus' 775 booked, as both wide bodies are flying, Airbus struggles to catch Boeing. 

In the A320NEO case this is true when comparing with the MAX. The Airbus announcement head start will carry for a decade its first place position, and before any reasonable analysis can conclude a meaningful outcome.

In 2014 Boeing ramped up closing on orders suspended by customer hesitations. Now 2015 came and went with order potential already spent. Boeing knew this at the beginning of 2015, as it forecast sales for only 755 units will be sold per guidance. The year 2016 will be an interesting wild card year for Boeing guidance, and should be adhered to by investors. If the bigger picture plays out in Boeing's favor, then 2016 will reflex the order book in a snappy way often found when letting go of a stretched-out rubber band. It will spring back with a solid 2016 order book yet to be disclosed.

The spring back includes the MAX being everything Boeing purports it to be, a better aircraft than the NEO version in the single aisle market. When its flight testing begins there maybe two different scenarios Boeing will play. 

The MAX is fantastic, or the MAX meets Boeing's expectation. 

Anything short exclaiming a "Fantastic" report means a long road to market relevance. The market expectation was already set by the NEO even before the 737 Max was announced. If the MAX becomes the real MAX envisioned, then Boeing has a winner making a lot of "should of", "would of", and "Could of" customers, who ordered the A320NEO, blush. I believe the MAX is the MAX and Boeing has a winner eventually flipping single aisle back into Boeing's favor by 2020.

Boeing will have a "No Building Base Jumping" year. The orders for Boeing for 2016 and the over-ordering for Airbus during 2015 will correct the current balance difference, significantly. Boeing will go 1,000 plus orders as the MAX approaches first flight in 2016, and the 787 goes sub "A350 backlog" during first part of 2016, and then goes back up above A350 Backlog from its robust production and order pacing. The 767 finds more freight calls with UPS and others. The orders come from market pressure out of many different ways and means. 

The "Big IF" in most break room conversations regarding 2015, will disappear into comments about how did Boeing do that during 2016?