Boeing Blasts Away With Major Delta Win (NYSE:BA)

The Farnborough International Airshow kicked off on the 18th of July and will end on the 22nd of July. The Farnborough International Airshow is not the first airshow to take place after the pandemic, but it is one of the airshows where a unique set of market dynamics come together and likely will be the subject of industry discussion and comment.

We are now in a high demand environment for air travel, so high that airlines cannot cope with demand and the supply chain for aircraft manufacturing is experiencing significant stress in the supply chain while inflation and oil prices remain elevated. While that is ongoing, Boeing (NYSE:BA) and Airbus (OTCPK:EADSF) (OTCPK:EADSY) are trying to rebuild production rates and Boeing is facing significant challenges keeping some of its aircraft developments within stretched schedules. So, there is a lot of momentum in the space but also a lot of pressure, which likely will be talking items during the airshow but most attention will go to the order announcements that jet makers will announce.

In an earlier report, I outlined my expectations for this year’s Farnborough International Airshow and in the coming days, I will provide daily coverage of the airshow with a focus on order news and other noteworthy items released during the show.

Without further ado, let’s have a look at the order announcements on Day 1 of the Farnborough International Airshow 2022.

Boeing books major win

The highlight of the day without doubt was the order from Delta Air Lines (DAL) for 100 Boeing 737 MAX 10 aircraft and options for 30. The order had been widely anticipated and in a recent report, I have outlined how Boeing has been increasing pressure on Congress to provide a waiver for the Boeing 737 MAX 10 certification process. Absent of that waiver, Boeing would likely need to implement a costly redesign effort and further delay the Boeing 737 MAX 10 service entry.

With the order from Delta Air Lines, Boeing has now customer support from US carriers in the form of United Airlines (UAL), Alaska Airlines (ALK) and Delta Air Lines. The aircraft will feature 182 seats comparable to the airline’s Boeing 737-900ERs with a higher share of Comfort+ seats and be part of Delta’s upgauging strategy.

The airline also added the following note to its press release:

The 737-10 is currently awaiting final certification from the Federal Aviation Administration, which is expected in 2023. In the event of a delay, the agreement has adequate protection in place, including allowing Delta to shift to another model of the MAX family if necessary.

So Delta Air Lines has some protection against any delays in the MAX 10 certification, but also urged Congress to grant the waiver. So, you could say things are really going as was expected. Delta Air Lines has also acquired the right to become a service provider for the CFM LEAP 1B turbofans, which fits right into the airline’s strategy while it contracted Boeing to perform the reconfiguration of 29 Boeing 737-900ERs. So, this is a sweet deal for Boeing but likely an even sweeter deal for Delta Air Lines.

A smaller order came from Aircompany Armenia which ordered 3 Boeing 737-800BCFs for delivery in 2023-2024. Furthermore, Boeing reconfirmed that Norwegian (OTCPK:NWARF) will take 50 Boeing 737 MAX aircraft but these orders are already in the order book and the only difference it has made is that last month these orders were already added back to Boeing’s backlog after the airline previously had identified these orders as unsuitable to be counted towards the backlog according to the framework of its accounting rules. Boeing also revealed All Nippon Airways as the customer for 20 Boeing 737 MAX 8 aircraft with options for 10 more and announced that the airline would be converting two Boeing 777-9 orders to two orders for the Boeing 777-8F.

Boeing also announced support for testing and qualification of sustainable aviation fuels from Alder and becoming a founding member of sustainable aviation fuel development hub in the UK. Boeing also expanded its regional presence in China with a contract 5-year program that will provide demand planning, on-site personnel, and logistics services to support GAMECO’s operations to optimize materials purchase and inventory costs and improve production service levels.

Airbus: A No-Show on Day 1

Airbus really didn’t have a lot to announce on Day 1 of the airshow. The European jet maker did announce an order for an unidentified number of H135 training helicopters from Morocco but that was about it in terms of orders. That doesn’t mean that it is a bad day for the jet maker as there are four more days of airshow ahead of us and there are rumors that Air Lease Corporation is close placing an order for a large number of Airbus A320neo aircraft.

Airbus did announce a letter of intent with a number of major airlines – Air Canada, Air France-KLM, easyJet, International Airlines Group, LATAM Airlines Group, Lufthansa Group and Virgin Atlantic- to explore opportunities for a future supply of carbon removal credits from direct air carbon capture technology and an agreement to advance the co-development of digital solutions for the Republic of Singapore Air Force’s expanding digital solutions coverage to include helicopters building on an agreement announced earlier this year but Airbus had nothing spectacular to announce on Day 1.

Aircraft Lessors and Services

Aircraft lessors had some small, but not unimportant announcements on the first day of the airshow:

• Air Lease Corporation (AL) announced the lease placement of six Airbus A220-300s with TAAG Angola Airlines to support its fleet renewal in 2023 and 2024.
• AerCap (AER) signed an agreement with Gol Linhas (GOL) for the lease of six Boeing 737-800BCFs.
• Pratt & Whitney announced Air Lease Corporation selected GTF engines to power 80 firm A320neo family aircraft, as well as 76 firm and 10 option GTF-powered A220.
• CFM, a joint venture of Safran (OTCPK:SAFRF) and General Electric (GE), announced that Delta Air Lines purchased 200 CFM LEAP 1B turbofans.

Conclusion

Without doubt, Boeing was the big winner of Day 1 of the airshow with the order from Delta Air Lines. In total, all orders and commitments had a value of $9.2 billion but we also saw that there were 20 orders that were customer reveals and there were 40 options which do not directly add to the backlog. The firm part of the orders was valued at $6.9 billion. So, we also see that some announcements from Boeing during the day, they weren’t truly as spectacular as they were announced earlier and were not really new business to Boeing. So, at all times it remains important to not just scan the headlines but also dig deeper to see what actually adds value and what might seem to be adding value but in fact does not. That is what we visualize using the TAF Airshow Order Tracker which showed that compared to the first day of the previous edition of the airshow there were 235 firm orders and tentative agreements valued $14.4 billion. So, there is a decline in order value without doubt but that is mostly because Airbus, COMAC and Embraer had a worse start having nothing to announce while Boeing had a far better start of the show. The big question is whether this momentum will continue during the second day of the trade show or whether this order bang for Boeing was really all that Boeing had to announce. Boeing is behind in the order race, so it really does need more orders to close the gap with Airbus.