Thursday, September 21, 2017

Boeing Raises Rate To 14 Because It Bagged Some Already

Turkish Airlines and Malaysia Airlines have both agreed to buy the 787. Turkish Airlines intends 40 787-9's and Malaysia political announcement marks 8 787 for delivery sometime in the future. If assuming, which Winging It is able to do, it raises its booked 787 orders for 2017 up to 130 units only when recorded by December 31, 2017. Usually deals like this takes months of haggling between maker and its customers. Announcements like these two recent ones takes more months before Boeing can book the orders. They await final signatures completing an order transaction.

Egad, Dubai is about eight weeks away and Emirates shrinks in stature as Boeing marches on in the wide body zone, all during a reported order down year. Boeing is pushing and shoving its way to an insurmountable lead over Airbus and its A-350 aspirations. The secret 787 sauce is popular and its not just the XWB moniker that customer's crave. 

Boeing market research is now paying big dividends as it guessed correctly with its 787 family of aircraft. Airbus has only sold 8- A-350-800's, 625- A-350-900's and about 200- A-350-1000's. Boeing beats Airbus over the head with both the its 787-8 and 787-9's and is in a parity with Airbus' A350-1000 with its 787-10 bookings. The Airbus book keeps experiencing A-350-1000 cancellation trend as customers transfer down for its more popular model A-350-900. After Dubai, Boeing will exceed Airbus overall with the Airbus family A-350's. Boeing will remain having a significant order lead.

The more important consideration is all of Boeing's sales flood a thin widebody market leaving Airbus with little or no room to expand with its XWB type with sales. 

Secondly, repeat business now favors Boeing as prior customers will add 787's to its fleets when refreshing its wide body fleets ten years into the future. Boeing customers studying the A-350 case will often more prefer the 787 when expanding its fleet inventory because it is a better business model than owning the fractured A-350 family of aircraft.

Image result for Boeing's three 787 models

With the A-350-800 as a none starter and the A-350-1000's suffering some book changes away from the model, the business case falls apart. The 787 family is complete and customer's can step into a proven business case for owning a whole fleet of  various 787's. This is beginning to show in the latest transactions where both Airbus and Boeing were in the order fight and Boeing won those orders.

The 14 a month rate change is more about what orders are pending, and those orders that are verbally committed from reliable customers who usually follow through with its intentions. Emirate's pending order for about 70 medium wide bodied aircraft from either Airbus or Boeing is being delayed once again, and is no longer a key for Boeing's push towards 14 a month production. 

Boeing can wait for an Emirates order when the airline is ready, maybe by 2018. However, Airbus finds itself in a pickle with its own production ramp-up where it will not have enough A-350 orders to keep up with Boeing's production schemes in the next five years. 

The A-350 has entered the market place and customers do appreciate the aircraft because is such an advancement over classic airplane versions, but Boeing is presenting a better business case for operating the 787 in customer's wide body fleets. 

Furthermore, when the 777X starts delivery, the market paradigm will firmly shift to a Boeing preference for a broad spectrum of customers and its family of aircraft possibilities.