Airbus Orders Plateau, Deals Big Blow To Qatar Airways (OTCMKTS:EADSF)

Last month, Airbus (OTCPK:EADSF, OTCPK:EADSY) published its July order numbers, which certainly did impress. There were over 400 gross orders, helped by a blockbuster order from Chinese state-owned airlines and a soft flurry of orders during the Farnborough International Airshow. Yesterday, Airbus published its order and delivery figures for August, and the contrast couldn’t be any bigger, as I discuss in this report.

For this report, I will be using the evoX order and delivery monitor developed by The Aerospace Forum. For those who have been following the monthly order and delivery reports that I write for Airbus and Boeing (BA), you might notice that this monitor looks completely different. So, I wanted to briefly introduce this new product that I will occasionally use as the backbone for investor updates. Over time, our data analytics capabilities have significantly expanded. With that come new insights on how to do things better. As a result, I have launched evoX, which combines front-end efforts and back-end improvements to improve our data analytics tools.

The evoX project introduces a completely new look for interactive monitors, but it does not stop there. We consolidated various monitors and pages into one, making more data accessible with a single tool and from the same data we present more information to you. So, we are better leveraging the hundreds of thousands of datapoints we got which allows us to better highlight the data driven approach of the analysis.

Just like before, using these tools we are able to analyze orders and deliveries and see where manufacturers are falling short, meeting or exceeding expectations.

No orders for Airbus

It is somewhat unfortunate that we are launching the new monitor this month, as Airbus actually booked no orders this month. So, it is not quite a spectacular month at all, which makes the left panel of the monitor a rather dull one, but only for this month. The lack of order inflow during the month means that there was a sequential decline of 401 gross orders.

During the month, the following changes were made to the order book:

• China Southern Airlines was identified as the customer for one delivered Airbus A319neo.
• Aviation Capital Group was identified as the customer for one Airbus A320neo and ended up converting two of its A320neo orders to orders for the A321neo.
• BOCOMM Leasing was identified as the customer for one Airbus A320neo.
• Chengdu Airlines was identified as the customer for one Airbus A320neo.
• China Express Airlines was identified as the customer for one Airbus A320neo.
• SMBC Aviation Capital Group converted orders for three Airbus A321neos to orders for three Airbus A320neos.
• Qingdao Airlines was identified as the customer for 1 Airbus A321neo.
• An order from AltavAir for the Airbus A330-300 was transferred from its North American entity to the UK based entity.
• Airbus cancelled orders for 19 Airbus A350-1000 once destined for Qatar Airways.

In August, we saw some usual customer identifications and conversions taking place as lessors and airlines align their orders with their fleet requirements leveraging the contract flexibility that Airbus provides. Cancellations only came from Aeroflot. The highlight of the month most likely was the cancellation of 19 Airbus A350-1000s. Airbus initiated that cancellation amidst a major dispute over a paint issue with Qatar Airways. I discussed the cancellation and dispute in a previous report which contains more details, but with the latest cancellation Qatar Airways no longer has any orders outstanding with Airbus. This goes to show how fed-up Airbus is with the flag carrier and one of the launch customers for the Airbus A350.

In August, Airbus logged 0 gross with an obvious value of $0 while it scrapped 19 orders valued $3.3 billion from the books, bringing the net orders to -19 orders with a negative value of $3.3 billion. A year ago, Airbus booked 102 orders and three cancellations, bringing its net orders to 99 units with a net order value of $5.9 billion. So, we see that order inflow increased significantly year-over-year.

Year-to-date, the European jet maker booked 843 gross orders and 206 cancellations bringing the net orders to 637 units with a net order value of $29.1 billion. In the first eight months of 2021, Airbus booked 269 gross orders and 137 net orders with a net value of $8.1 billion. So, despite the absence of orders this month, we’re seeing that Airbus is having a far better year so far with improving net order quantities and value.

Airbus Sees Naturally Weak Deliveries in August

In August, Airbus delivered 39 jets compared to 46 in the previous month. The European jet maker delivered 33 single-aisle jets and 6 wide-body aircraft with a combined value of $2.6 billion:

• Airbus delivered no Airbus A220s.
• A total of 33 Airbus A320neo families were delivered, consisting of one Airbus A319neo, 19 Airbus A320neos and 13 Airbus A321neos.
• Airbus delivered two Airbus A330-900s.
• Four Airbus A350s were delivered, three -900 models and one -1000 model.

In August, deliveries decreased sequentially but it should be pointed out that August naturally is a weak month for deliveries due to the summer holidays. To some extent, continuing supply chain issue also put pressure on deliveries, but I do not believe that this was the cause of the lower delivery numbers in August. Deliveries on the Airbus A320neo program remain largely underwhelming, and that is driven by supply chain disruptions which simply don’t allow Airbus to build and deliver at the targeted rate of 45 aircraft per month. Interestingly, there were no Airbus A220 deliveries, which I believe are also related to supply chain challenges.

Compared to last year, deliveries decreased by one unit while the delivery value decreased by $0.3 billion. Year-to-date, Airbus delivered 380 aircraft valued at $25.2 billion compared to 384 aircraft valued at $24.6 billion last year. Year-to-date numbers show that Airbus lost the delivery lead in July compared to last year while the value of the deliveries is just 2% higher. That really shows how big the challenges are to build planes.

The book-to-bill ratio for the month was 0 due to the absence of order inflow. For the first eight months of the year, the gross book-to-bill is 2.2 in terms of units and 2 in terms of value while the cancellation rate is 24% and 2.8% when measured against the backlog. The book-to-bill ratio for the year is looking extremely strong. This is primarily driven by a combination of the big order from Chinese airlines, but also by the underwhelming delivery numbers due to supply chain issues. So, book-to-bill ratios higher than one do show balance or oversold positions in general, but in this case they also reflect the big challenges when it comes to hiking production.

Conclusion: Airbus Stock Is A Long-Term Buy Despite Delivery Headwinds

This month was rather unexciting for Airbus. The company booked no orders after adding hundreds of orders in the month prior. Most noteworthy was the cancellation of the outstanding order from Qatar Airways initiated by Airbus. With this cancellation, that flag carrier of Qatar has no orders outstanding with the European jet maker.

On delivery side, things continue to look bleak, with Airbus A320neo deliveries falling behind of the communicated production rates and a complete absence of A220 deliveries during the month. However, August is naturally a slow month for Airbus, so given the realities faced today I do not see any major reason for concern.

I continue to like shares of Airbus for the longer term and continue to be invested in the company, with the notion that a major boost in deliveries is required to achieve this year’s delivery targets, which I believe is going to prove to be a major challenge.