October 25, 2020

Farnborough Airshow Day 1: Boeing bamboozling everyone


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By Dhierin Bechai From Seeking Alpha

Jul. 17, 2018


Boeing mixed in customer reveals to make Day 1 of FIA’18 look bigger than it really is.

Airbus won more orders and commitments.

Smaller jet makers signed agreements for 45 aircraft.

This idea was discussed in more depth with members of my private investing community, AeroAnalysis.

The aerospace industry tends to be a relatively closed one, making it relatively difficult to analyze and understand. That comes on top of the complexity of the industry. For investors without in-depth knowledge, this makes the industry somewhat difficult to invest in, but there certainly are moments where the jet makers such as Boeing (NYSE:BA) and Airbus (OTCPK:EADSF) become somewhat more transparent. This happens during the airshows when jet makers launch new products, give product presentations and make or announcements. The order announcements usually are a mix of customer reveals, new orders and orders pending finalization. So, via these airshows, you are given quite a nice insight into the sales pipeline.

The big airshows that often bring some big order news are the Paris Airshow, Farnborough International Airshow and the . The Paris Airshow and Farnborough Airshow are alternating events, and this year it is Farnborough Airport that will be the center of the commercial aircraft industry.

AeroAnalysis will exclusively cover interesting news from the show and order announcements along with commentary.


We are not expecting a launch for the NMA. In fact, Boeing’s management has used the airshow and the pre-air show conferences to explain why it is in no hurry to launch the program. In a previous report, we explained that in a perfect development scenario, a 2025 service entry is possible for the Boeing NMA. We continue to believe that with targeted reduction in specific fuel burn set by some turbofan developers, a 2027 or late 2026 service entry fits better in the overall timeline. Any faster development in combination with compression in the time between the first engine run and the service entry is considered adding risk to the development time frame.

Leeham News & Comment also reported that Boeing is contemplating the use of a metal fuselage. The use of a metal fuselage would mean that Boeing could potentially meet desired price range for the aircraft – but, in our view, would come at the expense of performance, appeal and competitive edge.

Looking at the order announcements, it is important to note the difference in the announcements. Orders can be divided into firm orders and LoI/MoUs (Letter of Intent/Memorandum of Understanding). A firm order subsequently can consist of a new order, firming up an earlier LoI/MoU, an order conversion or options. What we are mostly interested in are the new orders and firm-ups. LoI/MoUs are expression of intent to acquire a certain number of aircraft, possibly with options. Customers might also tentatively agree on converting part of its commitment to another aircraft type. The last category of announcements we have is the customer reveals. These do to add materially to the order book, but only classify unattributed orders to the customer.

Seemingly, Boeing announced 205 orders and commitments worth almost $25 billion. However, splitting between firm, LoIs/MoUs and customer reveals, the reality of Day 1 on the Farnborough International Airshow is a whole lot less rosy.

Firm orders:

GOL Airlines ordered 15 Boeing 737 8 aircraft.
Qatar Airways firmed up its commitment for 5 Boeing 777F aircraft announced in April this year.
ordered a total of 14 Boeing 777F aircraft, of which 4 seem to be new business for Boeing.
Conversion as part of firm contract:

GOL Airlines converted 30 of its existing orders for the Boeing 737 MAX 8 to 30 Boeing 737 MAX 10s.
What we see is that out of 205 orders and commitments, just 54 were “new” business. 24 aircraft were firm orders, and 30 aircraft were MAX 8 to MAX 10 conversions.

Now turning to LoI/MoU announcements.

LoI/MoU options:

DHL, as part of a purchasing contract, acquired 7 options for the Boeing 777F.
Turning to customer reveals:

Jackson Square Aviation was revealed as the customer for 30 Boeing 737 MAX aircraft.
DHL was identified as the customer of a previous unidentified order; possibly these are the 10 Boeing 777F aircraft ordered last month.
TAROM was identified as the customer for 5 Boeing 737 MAX 8 aircraft.
United Airlines (NYSE:UAL) was identified as the customer for 4 Boeing 787-9 aircraft.
Goshawk Aviation Limited was identified as the customer for 20 Boeing 737 MAX aircraft.
Jet Airways was identified as the customer for 75 Boeing 737 MAX aircraft.

What we see is somewhat disheartening but not so much of a surprise. Seventy percent of the announcements were merely customer reveals, which means that slightly more than seventy percent of the list price value has already been logged in the books. Options are not really interesting to look at, since it can take years before they are logged as firm orders, if they ever do. This leaves Boeing with 24 firm orders and 30 conversions valued at $5.2 billion at list prices. For Boeing, Day 1 of the Farnborough Airshow showed very little of its sales pipeline going forward and was inflated by the customer reveals.


Whereas Boeing can talk about a new jet that has yet to be built, Airbus is not working on an all-new jet, but it can certainly use the moment to talk down the NMA prospects and point at the Airbus A330-800 as a fitting solution and the Airbus A321LR as well as a possible upgraded variant. Additionally, it lies in line of expectation that the company would use every moment possible to put the Airbus A220 in the spotlight.

A350 900 1000 RR STARLUX

Being behind in the net order race by 259 units and Boeing booking 24 firm orders on the first day of the Farnborough International Airshow, there is no doubt that there is pressure on Airbus to announce a significant number of new orders during the show.

Seemingly, Airbus announced 186 orders and commitments worth $26.7 billion.

Firm orders:

Wataniya Airlines firmed an earlier commitment announced during the Dubai Airshow for 25 jets.
Goshawk Aviation Limited ordered 20 Airbus A320neo aircraft.
Macquarie AirFinance Group ordered 20 Airbus A320neo aircraft.
SalamAir ordered 1 new Airbus A320neo and agreed to receive another 5 that are already ordered via lessors.

An undisclosed lessor signed an MoU for 80 Airbus A320neo aircraft.
Vistara committed to 13 Airbus A320neo aircraft from Airbus and 37 coming from lessors.
STARLUX Airlines committed to purchasing 12 Airbus A350-100s and 5 Airbus A350-900s.
Customer reveals:

Sichuan Airlines was revealed as the customer for 10 Airbus A350-900 aircraft. The order was logged by Airbus on the 28th of June.

What we see is that on the first day of the show, Airbus depended a whole lot less on inflating its numbers with customer reveals. The European jet maker announced 66 firm orders, narrowing the gap with Boeing, and 110 tentative agreements which could be finalized in the near future.

Smaller jet makers

Besides Boeing and Airbus, the smaller jet makers and regional propeller aircraft manufacturers are also active on the airshow:

Embraer (NYSE:ERJ) announced that United Airlines has bought 25 Embraer 175 aircraft valued at $1.1 billion.
COMAC signed an MoU with Urumqi Airlines for 20 ARJ21 aircraft valued at $0.8 billion.

As Airbus was able to rake in more order at the first day of the air show, Boeing sent out a press release announcing $2.1 billion worth of service contracts. The announcement fits Boeing’s focus on services and might give the impression that the company raked $28.4 billion worth of business versus $26.7 billion for Airbus.

Atlas Air (NASDAQ:AAWW) signed an agreement for 20 Landing Gear Exchanges for its 747-8 fleet. Through the program, operators receive overhauled and certified landing gear from an exchange pool maintained by Boeing, with stocked components and supporting parts shipping within 24 hours.
Emirates signed an agreement to use the Optimized Maintenance Program (OMP) for a fleet of 150 777-300ER (Extended Range), 777-200LR and 777-300 aircraft, representing the largest 777 fleet in the world with an OMP. OMP, a Boeing AnalytX-powered product, delivers tremendous value by providing customized maintenance programs.
EVA Airways signed an agreement for a number of key products including Component Services for its 787 fleet, and quick engine change solutions. With Component Services, Boeing and its partners own, manage and maintain a global exchange pool inventory for convenient access. It also renewed Jeppesen’s charting and electronic flight bag (EFB) products for 10 years – a testament to the tool’s ability to improve navigation and flight operations across the fleet.
Hawaiian Airlines signed an agreement for EFB services across its Boeing 717, 767 and Airbus A330 and A321 fleet, which will enhance navigation and situational awareness and simplify preparation and in-flight procedures across the fleet.
Malindo Air has signed a long-term partnership agreement with Jeppesen to offer dispatcher training services at its operations center in Kuala Lumpur, Malaysia. The program, open to students across the aviation market, provides the foundation for multiple aviation career opportunities available with a dispatcher license.
Okay Airlines of China signed on to use Airplane Health Management (AHM) for its 737 MAX fleet. About 65 percent of all 737 MAX airplanes delivered so far are enrolled in Boeing AHM, which improves operations using predictive analytics supporting maintenance and engineering.
Primera Air will hold a signing ceremony for a significant services order Tuesday, July 17, at 1:45 p.m.
The Royal Netherlands Air Force has signed an agreement for Boeing to provide Performance-Based Logistics support for its fleet of AH-64 Apache and CH-47 Chinook helicopters. The five-year agreement is designed to combine Dutch Chinook and Apache support services into one integrated and efficient customer support program. This agreement was formally signed at the Royal International Air Tattoo show on Saturday, July 14.
The United States Air Force awarded Boeing a contract to provide crew instruction and operate, sustain, modify and upgrade the C-17 Aircrew and Maintenance Training Systems. The firm-fixed price award has a contract period up to 6.5 years and a potential total value of $986 million.
The U.S. Air Force awarded Boeing a four-year sole-source contract to repair, support, configure and provide parts obsolescence management for F-15 radars. Support includes Boeing field service representatives embedded into each F-15 flying squadron throughout the Combat Air Forces and sent worldwide wherever needed. Boeing also will provide engineering, customer training, system analysis and integration of all radar types throughout the U.S. Air Force F-15 fleet.
WestJet (OTC:WJAFF) became the 100th customer to sign on for Airplane Health Management. WestJet will use the Boeing’s AnalytX-powered product to provide predictive analytics for its 787 fleet.
Xiamen Airlines will hold a signing ceremony for a key digital order on Tuesday, July 17, at 2:15.
Conclusion Day 1 Farnborough International Airshow

Figure 1: Infographic Farnborough International Airshow 2018 Day 1

At first, one would think that Boeing was the big winner of Day 1 with an overall announcement tally for 205 units valued at $28.4 billion, including services. However, we need to be fair here and point out that much of the “value” comes from customer reveals. Airbus depended a whole lot less on customer reveals and announced 66 new orders and 110 commitments and only one customer reveal for 10 Airbus A350 aircraft.

This also shows in the order value (which includes commitments), where Airbus’s tally reached $23.6 billion, versus $5.2 billion for Boeing. Obviously, this has only been the first day of the airshow, but if Boeing depends on customer reveals for the remainder of the show, it could happen that Airbus takes a big step during the Farnborough International Airshow to close the order gap with Boeing.

While we do prepare these daily reports with the greatest care, it is possible that there might be some minor errors. When we detect an error, we will rectify as fast as possible and mention the changes made in the subsequent report.

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Disclosure: I am/we are long BA, EADSF.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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.


Source: DHL

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  1. […] Source: Cayman Eye News By Dhierin Bechai From Seeking Alpha Jul. 17, 2018 Summary Boeing mixed in customer reveals to make Day 1 of FIA’18 look bigger than it really is. Airbus won more orders and commitments. Smaller jet makers signed agreements for 45 aircraft. This idea was discussed in more depth with members… Link: Farnborough Airshow Day 1: Boeing bamboozling everyone […]

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