Airbus Stock Underperforms: Airplane Deliveries Tumble (EADSF)

Each year, I provide monthly overviews for orders, cancellations, deliveries, and other order book mutations for Airbus SE (OTCPK:EADSF, OTCPK:EADSY). While the release of monthly orders and other order news does not always directly impact the Airbus stock price, it is important to keep track of the orders and deliveries because this provides the smallest blocks of information from which we can assess how things are going for the European jet maker and detect trends early on. In this report, I will be analyzing the Airbus orders for January 2023 as well as the deliveries.

Why Did Airbus Stock Underperform?

Airbus Stock Price Development
Timeframe	Airbus	Market	Performance
January	+5.3%	+6.2%	Underperformance
Year-to-date	+0.8%	+6.9%	Underperformance

Click to enlarge

As I provide the reports on a monthly basis, it is also interesting to look at what Airbus stock has done over the month. After all, we are doing the analysis to align investors to make money. So, looking at stock prices is very relevant. During the month of January, EADSF stock gained 5.3% compared to 6.2% for the broader market, and year-to-date we are looking at a 0.8% gain compared to almost 7% for the broader market. While underperformance is not what we are looking for, the underperformance can be explained.

Starting with the year-to-date underperformance, the explanation is actually rather simple. Airbus stock was lifted in late 2022 by an order from Chinese Xiamen Airlines, which was The Boeing Company (BA) stronghold, and the re-opening of the Chinese travel market. Besides that, Boeing stock had a good run-up as well, driven by strong cash performance, cash projections, and order news. We tend to see these names move in tandem quite often, so positive Boeing news can also positively reflect on Airbus’ share price. With the strong outperformance, it is not odd to see some underperformance as investors take profits, and new catalysts to drive share prices higher might not manifest.

Looking at the underperformance during the month, it more or less coincides with the days where Boeing finalized an order for 200-250 aircraft from Air India. During those days, Boeing executives and representatives of engine manufacturers traveled to India to finalize Boeing’s part of the order, as reported by Reuters. The part of the order that will go to Airbus and could be announced in the coming days would follow shortly after. The fact that Airbus followed with the finalization after Boeing to me carries no significance, but it seems to have been used as a reason to take some profits.

News that Qatar Airways and Airbus reached a settlement on the Airbus A350 dispute also failed to lift stock prices, possibly driven by the thought that Airbus’ position against Qatar Airways was a lot less strong than initially believed. As part of the settlement, discounts can be applied on future airplane orders.

Airbus January 2023 Orders: Airbus A320neo and Airbus A321neo Pull The Cart

In December, Airbus booked 37 gross orders, marking a sequential increase of 21 orders, solely consisting of single-aisle aircraft with an estimated value of $1.8 billion:

• Delta Air Lines (DAL) converted options for 12 Airbus A220-300s into firm orders.
• An undisclosed customer ordered six Airbus A320neo and six Airbus A3321neo aircraft.
• Uzbekistan Airways ordered eight Airbus A320neo and four Airbus A3321neo aircraft.
• DAE Capital ordered one Airbus A320neo.

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

• Tibet Airlines was identified as the customer for two Airbus A319neo aircraft.
• An order for two Airbus A320neo aircraft was transferred from BOC Aviation to FlyNas.
• NAS Aviation Services converted an order for one Airbus A321neo to an order for one Airbus A320neo.
• Viva Air cancelled an order for one Airbus A320neo.
• Jet2 was identified as the customer for three Airbus A321neo aircraft.
• Martinair was identified as the customer for four Airbus A350Fs.

Airbus started the year in a muted fashion, which is not good but also not bad. We saw no big highlights or unexpected events during the month. The order conversion from Delta Air Lines demonstrates the appealing value proposition of the Airbus A220, but overall order inflow was carried by the Airbus A320neo and Airbus A321neo.

As expected, the order for four Airbus A350F aircraft placed in December 2022 was attributed to Martinair, which is part of Air France-KLM (OTCPK:AFRAF).

Airbus logged 37 gross orders with a value of $1.8 billion, while it scrapped one order valued at $51.5 million from the books, bringing the net orders to 36 orders with a value of $1.78. A year ago, Airbus booked 36 orders and 52 cancellations, bringing its net orders to -16 units with a net order value of -$1.6 billion. While gross order inflow was more or less flat year-over-year, the lower cancellation numbers caused a $3.4 billion swing in net order inflow.

Airbus January 2023 Deliveries: A Disappointing Start

In January, Airbus delivered 20 jets compared to 98 in the previous month. The European jet maker delivered 18 single-aisle jets and two wide-body aircraft with a combined value of $1.2 billion:

• Airbus delivered two Airbus A220s.
• A total of 16 Airbus A320neo family aircraft were delivered, consisting of two Airbus A319neo aircraft, six Airbus A320neo aircraft, and eight Airbus A321neo aircraft.
• Airbus delivered one Airbus A330-900.
• One Airbus A350-900 was delivered.

Last year, I deemed the delivery target for commercial aircraft that Airbus set unrealistic. The European jet maker confirmed towards the end of the year that it would not meet its delivery target as supply chain issues persisted longer than expected, resulting in some deliveries to slip into 2023. However, the soft delivery numbers are not reassuring that Airbus is back on track or that deliveries truly have slipped into 2023. If that was the case, or better said if Airbus missed the target by a matter of days, we should have seen a stronger delivery volume for January.

Airbus has yet to provide a guidance for 2023, which it will likely do during its upcoming earnings call this week, but the January delivery numbers are not what was in line with expectation. Compared to last year, January delivery numbers declined by ten units or a third from 30 deliveries to 20 deliveries while the value of those deliveries declined from $2 billion to $1.2 billion, driven by a combination of delivery volume and delivery mix.

The book-to-bill ratio for the month was 1.9 in terms of orders and 1.5 in terms of value, while the cancellation rate was 2.7% measured against the order inflow, and negligible when measured against the backlog. The book-to-bill ratio for the year is looking extremely strong. As I noted previously, we are looking for book-to-bill ratios higher than one, but even when that is achieved, these ratios should also be placed in context. January was a good example of the ratio being higher than one due to poor billing volumes driven by issues for Airbus to deliver aircraft.

What Is Airbus’s Delivery Target For 2023?

For 2023, Airbus has yet to provide a delivery target. On the 16th of February, the European jet maker will be providing its fourth quarter and full year results as well as its guidance, which will include a guidance on commercial airplane deliveries for 2023. What is clear, however, is that Airbus eyes higher deliveries that are higher than the 661 in line with last year, and according to my own estimates are closer to 725 deliveries in line with the initial guidance Airbus had for 2022.

How Do Airbus Deliveries Compare To Boeing?

Boeing has yet to provide its official data on the January 2023 delivery numbers, but preliminary delivery data that I have available suggest Boeing deliveries could reach around 41 airplanes.

Conclusion: Airbus Stock Remains A Buy Despite Challenges

Airbus without a doubt started the year soft. Looking at orders, I am not particularly concerned. The jet maker has a strong product portfolio and will be able to attract business and has a strong backlog. However, the delivery volume does not rhyme with Airbus’ indications that the delivery target would be missed because some deliveries would slide into 2023 or at least Airbus.

Last year, Airbus missed its targets by a wide margin, even though it noted that the delivery numbers would not fall short materially of the initial guidance. The shortfall last year and the numbers for January suggest that the performance at Airbus is underwhelming. We have yet to see any news from Airbus on a delivery target for this year but if January is an indication, it might be more challenging to at least replicate last year’s delivery number.

Despite the challenges, I do believe Airbus SE stock remains a buy, driven by long-term demand drivers and a geopolitical landscape that gives Airbus an edge in a key market.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.