PRESS RELEASE
ARE ENGINE PROBLEMS STALLING BOEING AND AIRBUS' ABILITY TO DELIVER?
As Boeing (tomorrow) and Airbus (next week) prepare to announce Q3 results, Dr Stuart Hatcher, Chief Operating Officer at IBA Group, looks behind the number of new aircraft deliveries and shares his analysis:
"Both Airbus and Boeing’s ability to deliver new aircraft has made it difficult to understand how they can get to the higher rates that both companies have been promising.
Engine entry into service issues have plagued all variants so far, even for aircraft that are already well-established (such as the Boeing 787) meaning that the engine OEMs are taking on more and more risk in the process.
The engine Original Equipment Manufacturers (OEMs) have continued to feel the pressure in 2018, and this is set to continue into 2019 as well.
Every new engine has its share of problems when entering service and maybe it’s because the existing technology has proven so reliable, but both Pratt & Whitney and CFMI have encountered issues that have affected reliability and resulted in the airframe production line being substantially held back.
Both OEMs have been quick to respond to ensure grounded aircraft get back into revenue service as soon as possible, to the detriment of the new airframe deliveries. However, the availability of Trent 1000s has had a more profound effect on the in-service fleet. A fix maybe on the way for the Trent, but the cost to Rolls Royce will likely be substantial, in terms of repairing relationships with the airlines. Still, at least it gives the A340 a chance to pick up the capacity slack in the short term.
Chart 1 (link below& attached) is a snapshot of the monthly deliveries for all A320 and 737 family variants since the first neo entered service in January 2016 and the panic to get year-end positions filled is evident – more so for Airbus, but Boeing appears to have similar issues on delivering the MAX.
With the exception of some year-end stuffing by the OEMs, backlogs appear to be reaching their natural apex, limited by the industry’s propensity to plan-out only so far ahead, with what is currently on offer. Global traffic growth is steadily increasing above OEM estimations (although they are likely to be baking in a couple of recessions into that forecast).
Chart 2: OEM backlog (& attached)
Until now, gross orders have closely followed oil trends, although if the market has reached saturation with regard to firm orders, we would expect to see this trend fall away until another market disruptor enters the fold (Boeing’s New Midsized Airplane perhaps?) or oil price stabilizes.
Cancellations against in-year orders are also on the up and are at the highest point over the last 15 years, although with backlogs so high and in-year orders trailing the trend from the last few years, this is not that surprising. Long term, cancellations against the overall backlog remains low (<2%)."