Boeing announced one of the largest orders in its history Tuesday. But it was still topped by rival Airbus.
Both aircraft makers announced massive orders from Air India, which is gearing up its own expansion plans.
Boeing’s order, which was announced by President Joe Biden after a call with Indian Prime Minister Narendra Modi, was for 220 firm jet orders: 190 of Boeing 737 Max single-aisle planes, 20 of 787 Dreamliners widebodies and 10 of 777X, the newest version of its widebody now undergoing the certification process.
It’s the third biggest sale of all time for Boeing.
But Airbus announced orders for 250 jets, including 140 A320neo and 70 A321neo single-aisle planes, along with 34 A350-1000 and six A350-900 widebodies.
It’s a sign of the competitive disadvantage that Boeing still finds itself facing, especially in selling narrow-body, single-aisle jets, a segment of the market that Airbus continues to dominate.
Boeing has been narrowing the gap with Airbus in orders, helped especially by an even larger order from United late last year. For all of 2022, Boeing announced a total of 808 net commercial aircraft orders, up from 535 a year earlier. But Airbus edged it out with 820 orders.
Boeing has had a particularly hard couple of years. It experienced a 20-month grounding of its best-selling 737 Max following two fatal crashes, with rising trade tensions between China and the United States leading to a virtual halt in sales to China, the world’s largest market for plane sales, and of course the pandemic.
But even in 2018, when Boeing reported record sales revenue, it trailed Airbus by about 200 net jet orders for the year.
Outlook for aircraft orders improving
The good news for Boeing is that aircraft manufacturing is essentially split between the two companies, and there’s a long backlog of orders at both. Boeing had a backlog of nearly 4,600 jets on its books at the end of January.
And as the Air India order demonstrates, global airlines are starting to gear up to make new purchases as they climb out of years of losses caused by the plunge in demand during the pandemic.
Global air traffic is expected to boom this year, returning to pre-pandemic levels in June, according to a new report from aircraft leasing company Avolon.
And the global airline industry is expected to return to profitability this year for the first time since 2019, according to the International Air Transport Association. The US industry already returned to profitability in 2022.
Boeing’s Air India order was valued at a list price of $34 billion. Airbus no longer publishes a list price for its aircraft, but its most recent list price from 2018 would have valued its Air India order at nearly $38 billion.
Airlines do not pay full list prices for commercial jets, especially when placing an order this large. But even at a discount of 50%, which is not unusual, Boeing’s Air India order would mean a sale valued at $17 billion.
That’s an important lift to a company still struggling to recover from the plunge in revenue and financial losses it suffered over the last four years.
Boeing’s 2022 revenue came in at $66.6 billion, up $8 billion from the trough in sales in 2020, but far lower than its record 2018 revenue of $101 billion before the grounding. Boeing gets most of its sales revenue once a plane is delivered, and the 777X has yet to be built. The planes in this order are years away from delivery.
The Air India purchase also includes an option that allows it to buy an additional 50 Boeing 737 Max’s and 20 Boeing 787s, totaling 290 airplanes. At list price, that order would be valued at $45.9 billion.
Biden touts order
In a statement, Biden said the sale would “support over one million American jobs across 44 states, and many will not require a four-year college degree.”
“This announcement also reflects the strength of the U.S.-India economic partnership,” Biden wrote. “Together with Prime Minister Modi, I look forward to deepening our partnership even further as we continue to confront shared global challenges — creating a more secure and prosperous future for all of our citizens.”
Production will support three separate U.S.-based manufacturing lines, have a total economic impact of $70 billion across the United States and support an estimated 1.47 million direct and indirect jobs, a White House official said Tuesday.
India’s growing economic might
India has been gaining some manufacturing business as Western tensions flare with China, including major companies that traditionally rely heavily on Chinese production. Apple is one such company, with Minister of Commerce and Industry Piyush Goyal saying the tech giant was already making between 5% and 7% of its products in India.
India is set to overtake China this year to become the world’s most populous country. The country’s massive and cheap labor force, which includes workers with key technical skills, is a big draw for manufacturers. Asia’s third-largest economy also offers a growing domestic market. In 2023, as global recession fears persist, India is expected to remain the fastest growing major economy in the world.
If it can sustain that momentum, India could become only the third country with GDP worth $10 trillion by 2035, according to the Centre for Economics and Business Research, after the US and China.
Boeing woes
Boeing’s (BA) 737 Max has been plagued with problems, but production and orders for the troubled aircraft has picked up, boosted by an even larger order from United late last year. In June, Ethiopian Airlines took delivery of a 737 Max from Boeing for the first time since the March 2019 crash that killed all 157 people on board, and led to a 20-month grounding of the jet.
The company has plenty of other troubles in China, the world’s largest aviation market. It has been on the verge of being virtually shut out of the region as trade tensions between the United States and China have basically halted Boeing sales in the country for the last four years.
The company has not announced any sales to a Chinese passenger airline since November 2017, and the country banned the Boeing 737 Max for much longer than most countries. In January, a Boeing 737 Max took off in China for the first time since 2019.
Boeing has faced myriad problems in recent years, beyond the drop in demand for passenger planes that occurred during the pandemic. Delivery of the 787 Dreamliner widebody jets resumed last year after they were halted due to quality control issues.
-CNN
